Asset Protection Strategies

Timing: Transfers Made After a Claim Arises Can Be Undone

Pennsylvania's Uniform Voidable Transactions Act, 12 Pa.C.S. § 5104, lets a creditor void a transfer made with actual intent to hinder, delay or defraud any creditor, whether the creditor's claim arose before or after the transfer. Among the factors a court may weigh are whether the transfer went to an insider, whether the person kept control of the property, whether they had been sued or threatened with suit before the transfer, and whether they became insolvent shortly afterward.

Under 12 Pa.C.S. § 5109, a claim based on actual intent generally must be brought within four years after the transfer, or, if later, within one year after the transfer was or could reasonably have been discovered. This is why asset protection has to be in place before a lawsuit, a business problem, or a care need arises. Moving assets after a claim surfaces often invites a challenge rather than preventing one.

Trusts: A Revocable Trust Does Not Shield Assets From Your Own Creditors

Both states have adopted versions of the Uniform Trust Code, and both follow the same basic rule. During the settlor's lifetime, the property of a revocable trust is subject to claims of the settlor's creditors (20 Pa.C.S. § 7745 in Pennsylvania; N.J.S.A. 3B:31-39 in New Jersey, enacted by P.L. 2015, c. 276). A living trust remains valuable for avoiding probate and planning for incapacity, but it is not an asset protection tool on its own.

For an irrevocable trust, a creditor of the settlor may reach the maximum amount that can be distributed to or for the settlor's benefit. In practice, a trust you create for yourself offers limited protection in Pennsylvania and New Jersey. Irrevocable trusts that benefit a spouse, children, or other family members, and that the settlor cannot draw from, are the structures more often used to protect assets for the next generation.

Retirement Accounts: Federal Protections and Their Limits

Federal law already protects many retirement savings. Under ERISA, 29 U.S.C. § 1056(d)(1), each pension plan must provide that benefits under the plan may not be assigned or alienated, which generally keeps employer plans such as 401(k)s out of reach of ordinary creditors.

In bankruptcy, 11 U.S.C. § 522(n) caps the exemption for traditional and Roth IRAs. Effective April 1, 2025, that cap is $1,711,975, not counting amounts rolled over from employer plans and their earnings. Because retirement accounts are already protected to this extent, we review beneficiary designations and account titling before recommending a more complex structure.

Long-Term Care: The Five-Year Medicaid Look-Back

Creditors are not the only risk. For transfers made on or after February 8, 2006, federal Medicaid law, 42 U.S.C. § 1396p(c)(1)(B), looks back 60 months from the application for assets given away for less than fair market value. A gift inside that window can delay long-term care coverage, so Medicaid asset planning leaves the most options open when it starts five or more years before care is expected. Our Medicaid and long-term care planning pages explain the Pennsylvania and New Jersey rules in more detail.