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Spousal Transfers: We Told You So



Volume XXI • Number 3 • August 2013


We are often asked by potential clients, “Can’t I just transfer my assets to my spouse to protect them?” We have always recommended against that “strategy” for a number of reasons, not the least of which, we tell our clients: “What if she/he decides to divorce you? You could lose it all forever.” Another significant reason is that the transfer could be easily “undone” by a court if a fraudulent transfer is found to have occurred. Thus, no asset protection.


Repercussions from the Madoff debacle still abound. Our firm was contacted by several potential clients immediately after the blow up. These individuals, fearing a likely “clawback” by the Madoff bankruptcy trustee, sought our help to implement asset protection strategies so they could keep what they believed were their funds. After research and consultation with bankruptcy counsel confirmed that to assist clients in these circumstances would be a violation of bankruptcy law, we declined all such cases.


James Greiff, being represented by the New York office of Becker & Poliakoff against the Madoff bankruptcy trustee seeking a $2 million clawback, was directed to Richard Cahan, of their Miami office for asset protection planning. Cahan told Greiff that “he was an expert in the area of asset protection” and would represent Greiff for a discounted fee of $44 thousand.

At the time Mr. Greiff paid that fee, Cahan had never met with nor spoken to Mrs. Greiff whom the firm later represented. Cahan’s plan had Mr. and Mrs. Greiff each retain separate outside marital counsel to put together a post-nuptial agreement wherein Mr. Greiff transferred all of his assets to his spouse.

These spousal transfers included $1.4 million in cash, a $3 million beachside home, a $1 million beach condominium, two parcels of land valued at $1.4 million, an Aston Martin and a BMW. Note for later : According to court records: The post-nuptial agreement also contained a provision by which Mr. Greiff agreed to indemnify and hold his spouse harmless from any and all obligations arising from the assets transferred pursuant to the agreement.

Court records further allege: that nearly all of the transferred assets had been acquired by Mr. Greiff prior to his marriage through his earnings and employment and that it was “highly unlikely” that Mrs. Greiff would otherwise have any legal claim to these assets in the event of a dissolution of marriage. Mrs. Greiff provided “consideration” under the post-nuptial agreement by waiving any and all claims she might have against income earned by Mr. Greiff for a period of three years following the execution of the agreement. Side note: at the time he executed the agreement, Mr. Greiff was not earning any income, nor did he have prospects or plans of any kind for earning income, as his business was insolvent.

Surely you know what happened next: three months after the transfers, Mrs. Grieff filed for divorce (Note: at the time the agreement was signed there was no hint of marital discord). Mr. Greiff sought to have the post-nuptial agreement declared invalid, but the divorce court upheld it, leaving Mr. Greiff essentially penniless. As if that were not enough, Mrs. Greiff was sued by the Madoff bankruptcy trustee who claimed the post-nuptial asset transfers were fraudulent, and, of course, she then called upon Mr. Greiff to honor the indemnification and hold harmless provisions of the post-nuptial agreement (mentioned above) by reimbursing her the legal fees she incurred in defending the claim of the Madoff bankruptcy trustee (and, if unsuccessful in that defense, to pay the $2 million clawback that Mr. Greiff was seeking to protect his assets from in the first place). Has Mr. Greiff suffered enough? No, of course not. To add insult to injury, court records further allege that Becker & Poliakoff withdrew as Mr. Greiff’s counsel to represent his wife (and that Mr. Greiff was left without the means with which to hire a new lawyer in the Madoff proceedings).


Mr. Greiff did find a lawyer to file suit against Cahan and Beckler & Poliakoff for negligence and malpractice based upon numerous allegations. The law firm, calling the suit meritless, intends to mount a vigorous defense. Meanwhile, Mr. Greiff is minus his assets.


We will not comment on how the post-nuptial agreement might have been structured differently to protect Mr. Greiff against the possibility of a near-term divorce, because the real point here is that the case should not have been accepted and that spousal asset [protection] transfers are fraught with problems. If Mr. Greiff had done nothing, he would have been poorer by $2 million (the Madoff clawback), but not by everything else he owned. Our advice, once again: Use experienced, qualified counsel to advise you of your options, and do so before you have problems.

Donlevy-Rosen & Rosen, P.A. is a law firm with a focus on asset protection planning and offshore trusts. Attorneys Howard Rosen and Patricia Donlevy-Rosen co-founded the firm in 1991, and have since become recognized authorities in the field of asset protection planning. Let us explain the significant difference our experience can make when protecting your assets. Call 305-447-0061 or simply visit our contact page