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Overview
Scope of the chapter. Part IX turns from the law of asset protection to its practice. This chapter addresses the first stage of every engagement: the intake interview, the screening of the client for existing and foreseeable creditors, and the solvency analysis that determines whether the client may transfer assets and in what amount. It covers the solvency tests of the voidable transfer statutes and the Bankruptcy Code, the valuation of contingent and unliquidated claims, the treatment of exempt assets, the solvency affidavits required by many domestic asset protection trust statutes, the red flags that should lead the planner to decline, and the written record of the analysis. The chapter closes with intake in the Threat Matrix.
Why intake decides the plan. The failed plans collected in chapter 55 share a common origin: the planner accepted an engagement that should have been declined or limited, or advised a transfer the client could not afford to make (see infra ch. 55). Most of those failures were visible at intake. The client had been sued or threatened, had guaranteed debts that were about to be called, was not paying debts as they fell due, or proposed to transfer substantially all of his assets. A planner who identifies these facts before advising can decline, limit the plan to exempt assets and insurance, or size the transfer so that the client remains solvent with a margin. A planner who learns them after the transfer has become a witness.
Three questions. Intake answers three questions. First, may the planner act at all? The rules of professional conduct and the anti-money-laundering rules require the planner to know the client, the source of the client's wealth and the purpose of the engagement (see supra chs. 3, 45). Second, does the client have creditors, existing or foreseeable, whose claims the plan would affect? The voidable transfer statutes protect both (see supra chs. 5, 7). Third, will the client remain solvent after the proposed transfer, on every test the law applies? The answer to the third question determines the size and form of the plan.
Relationship to other chapters. The professional responsibility framework is addressed in chapter 3 (see supra ch. 3), the timing of transfers and the classes of creditors in chapter 5 (see supra ch. 5), and the elements of actual and constructive fraud in chapters 6 and 7 (see supra chs. 6, 7). Know-your-client and source-of-wealth procedures under the anti-money-laundering rules are addressed in chapter 45 (see supra ch. 45), and the client profiles that inform the risk assessment in chapter 51 (see supra ch. 51). The engagement letter and the planning file that record the intake are addressed in chapter 53 (see infra ch. 53).