Asset Protection in New York

New York gives creditors more powerful enforcement tools than most other states. A judgment creditor can freeze bank accounts without a court order, garnish wages, compel turnover of assets held anywhere in the world, and subpoena detailed financial records. The speed and reach of these remedies under CPLR Article 52 make New York one of the most creditor-friendly states for judgment collection.

The state’s domestic protections are limited. New York does not recognize self-settled asset protection trusts, homestead exemptions cover a fraction of most homeowners’ equity, and LLC membership interests can be seized. For residents with meaningful assets and real exposure to lawsuits, effective asset protection typically requires structures outside the state’s legal system.

Creditor Enforcement Under CPLR Article 52

New York’s creditor enforcement statute gives judgment creditors a set of tools that few other states match. The most dangerous is the restraining notice under CPLR § 5222. A creditor’s attorney can serve a restraining notice directly on any bank, brokerage, or third party holding the debtor’s assets, and the notice freezes everything immediately. No court order is required. A creditor who obtains a judgment on Friday can freeze the debtor’s accounts the following Monday.

The restraining notice reaches broadly. Served on a brokerage firm, it freezes investment accounts. Served on a tenant, it redirects rental income. Served on a business that owes the debtor money, it intercepts receivables. The debtor cannot move, transfer, or withdraw any restrained funds until the restraint is lifted or the judgment is satisfied.

New York courts also have global reach over assets held outside the state. In Koehler v. Bank of Bermuda, 12 N.Y.3d 533 (2009), the Court of Appeals held that once a New York court establishes personal jurisdiction over a debtor, it can compel turnover of assets held anywhere. CPLR § 5225 gives the court authority that follows the person, not the location of the asset.

A debtor who lives in New York can be ordered to produce assets held anywhere, so long as the debtor has the legal ability to do so. The combination of restraining notices and global turnover powers makes New York uniquely hostile to people holding liquid assets in personal accounts.

Homestead Exemption

New York’s homestead exemption protects a limited amount of home equity from creditors. The exemption amount varies by county and is adjusted periodically.

The highest-cost counties (the five boroughs, Nassau, Suffolk, Rockland, Westchester, and Putnam) have an adjusted exemption of approximately $204,825. Mid-tier counties (Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster) are covered at roughly $170,700. The remaining counties receive approximately $102,400. Married couples who both own the property can each claim the exemption, protecting up to roughly $410,000 in a high-cost county.

These figures cover only a fraction of most New York City homeowners’ equity. Median home prices in Manhattan, Brooklyn, and much of the metro area exceed $700,000. A physician who owns a $1.5 million home in Westchester with no mortgage has approximately $1.3 million in exposed equity. Investment properties do not qualify at all, because the exemption covers only a primary residence.

By contrast, Florida’s homestead exemption has no dollar cap. A homeowner in Florida with $5 million in home equity is fully protected. Texas similarly offers unlimited-value homestead protection. New York’s capped exemption ranks among the weaker protections nationally when measured against actual home values in the state’s most populated areas.

Why Self-Settled Trusts Do Not Work in New York

New York prohibits self-settled asset protection trusts. EPTL § 7-3.1(a) states that a trust created for the benefit of the creator is void against existing and future creditors. If the settlor retains any beneficial interest, creditors can reach whatever the trustee could distribute.

New York courts enforce this rule regardless of how the trust is structured. In Vanderbilt Credit Corp. v. Chase Manhattan Bank, 100 A.D.2d 544 (2d Dep’t 1984), the court confirmed that creditors could access trust assets where the trustee had discretion to distribute to the settlor. Adding a spendthrift clause, making the trust irrevocable, or using complex drafting does not change the outcome. Courts look at substance, not form.

New York also has no domestic asset protection trust statute. Roughly 21 states have enacted DAPT laws that allow self-settled trusts to protect assets from creditors. New York is not one of them. A New York resident who creates a DAPT in Nevada, Wyoming, or Delaware faces the same problem every out-of-state DAPT carries: the home state’s courts are not required to apply the DAPT state’s law.

If the creditor sues in New York, the court will likely apply New York law, which does not recognize the trust’s protective features. The DAPT home-state recognition problem undermines every out-of-state domestic trust.

An irrevocable trust for the benefit of other family members (a spouse, children, or a dynasty trust) can still protect assets from the settlor’s creditors, provided the settlor retains no beneficial interest and the transfer is not a voidable transaction. The tradeoff is permanent loss of access to the transferred assets.

LLC and Business Entity Protection

LLCs separate business assets from personal assets, and that separation holds when the claim is against the LLC itself. When a creditor holds a judgment against the LLC member personally, New York’s protection is weaker than most people assume.

New York does not limit creditors to a charging order as the exclusive remedy against an LLC membership interest. Under CPLR § 5225, a judgment creditor can compel turnover of an LLC membership interest directly. In 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589 (1st Dep’t 2022), the court allowed a creditor to seize a debtor’s membership interest. Courts have also permitted foreclosure of LLC interests and, in limited circumstances, reverse veil-piercing to reach assets inside the entity.

Single-member LLCs face particular exposure. A creditor with a judgment against the sole member can step into the member’s management role and liquidate the LLC’s assets. Adding a second member, such as an irrevocable trust, can invoke stronger protections in states that limit creditors to charging orders against multi-member LLCs. But New York’s LLC statute does not clearly establish the charging order as the exclusive remedy even for multi-member LLCs. States like Florida and Nevada have resolved this question by statute. New York has not.

Tenancy by the Entirety

New York recognizes tenancy by the entirety for real property owned by married couples. When both spouses hold title as tenants by the entirety, a creditor of only one spouse cannot force a sale, partition the property, or place a lien on the debtor spouse’s interest. The protection lasts as long as the marriage and joint ownership continue.

This protection is meaningful but narrow. It applies only to real property. New York does not extend tenancy by the entirety to bank accounts, brokerage accounts, or other personal property. Among the 25 states that recognize tenancy by the entirety, New York’s version is among the most limited in scope.

The protection also fails in common situations. If both spouses are liable because both signed a personal guarantee, both own a business together, or both are named in a lawsuit, a joint creditor can reach the entireties property. Unmarried individuals receive no protection at all. For married couples with only one spouse facing liability and whose primary asset is their home, tenancy by the entirety is useful. For everyone else, it provides little.

Retirement Accounts and Exempt Assets

Retirement accounts receive the strongest creditor protection available to most New York residents. ERISA-qualified plans (401(k)s, pension plans, profit-sharing plans) are protected from creditors under federal law regardless of value. This protection applies in both state court collection actions and bankruptcy.

IRAs receive protection under New York law (CPLR § 5205(c)), which exempts funds reasonably necessary for the support of the debtor and dependents. In bankruptcy, federal law caps IRA protection at approximately $1.5 million (adjusted periodically), though New York’s state exemption is potentially broader for IRAs outside bankruptcy.

Life insurance cash values and annuity contract proceeds are protected from creditors under New York Insurance Law § 3212. The exemption covers the cash surrender value of a life insurance policy and the proceeds of an annuity contract, provided the policy or contract names a beneficiary other than the insured’s estate. This protection exists by statute and does not require any special trust structure, though the exemption does not apply to premiums paid with the intent to defraud creditors.

New York’s personal property exemptions under CPLR § 5205 are modest. They include a motor vehicle up to $4,550, household furniture and appliances, clothing, and limited amounts of cash. Wages are partially protected: CPLR § 5231 limits income execution to 10% of gross income or 25% of disposable earnings, whichever is less.

Once deposited into a bank account, the wage protection can erode if the debtor does not assert the exemption. A judgment debtor whose assets consist primarily of bank accounts and investment portfolios has almost no personal property exemptions to fall back on.

Fraudulent Transfer Rules After the UVTA

New York adopted the Uniform Voidable Transactions Act in 2019, effective April 4, 2020. The UVTA replaced the state’s 95-year-old Uniform Fraudulent Conveyance Act and made several changes that affect asset protection planning.

The statute of limitations dropped from six years to four. Under the old law, a creditor could challenge a transfer up to six years after it occurred. Under the UVTA, the window is four years for constructive fraud claims (transfers for less than reasonably equivalent value while insolvent). For claims based on actual intent to defraud, the deadline is four years or one year after discovery, whichever is later.

The burden of proof also shifted. Under the old law, intentional fraudulent conveyance required clear and convincing evidence. The UVTA lowered this to preponderance of the evidence, making challenges easier to sustain. The UVTA also codified eleven badges of fraud, including whether the transfer was to an insider, whether it was concealed, and whether the debtor was being sued or threatened with suit at the time.

For asset protection planning, the net effect is mixed. The shorter statute of limitations benefits people who plan early—a transfer that survives four years without challenge is beyond reach. But the lower burden of proof makes transfers within that window easier to attack. New York residents considering asset protection planning should assume creditors will challenge transfers aggressively under the UVTA.

Transfers made before April 4, 2020 remain subject to the old law’s six-year statute of limitations.

Offshore Trusts for New York Residents

New York’s combination of aggressive creditor enforcement and weak domestic protections makes offshore trust planning particularly relevant for residents with substantial liquid assets. An offshore trust addresses the specific enforcement problems that New York law creates.

A Cook Islands trust holds assets with a foreign trustee who has no presence in the United States and no accounts subject to CPLR Article 52. A New York restraining notice freezes domestic accounts instantly, but it has no legal effect on a Cook Islands trustee operating under Cook Islands law. The creditor’s most powerful domestic tool simply does not reach assets held in a properly structured offshore trust.

The Koehler global turnover doctrine has a specific limitation. The court can compel the debtor to do what the debtor has the legal authority to do. In an offshore trust structured with an independent trustee and proper distribution standards, the debtor does not have unilateral authority to compel distributions. The trustee, not the settlor, controls the assets. A New York court can order the debtor to request a distribution, but the trustee is not required to comply.

Cook Islands law imposes a one-to-two-year statute of limitations on transfer challenges, and fraudulent intent must be proved beyond a reasonable doubt. That standard is far higher than New York’s preponderance test under the UVTA. Once the Cook Islands limitations period expires, the transfer is beyond challenge in that jurisdiction regardless of what New York law provides.

New York residents considering offshore trust planning should weigh the state’s enforcement environment against the cost of an offshore structure. For people with liquid assets above $500,000 and real liability exposure, New York’s creditor-friendly enforcement and limited domestic exemptions create a strong case for planning beyond state borders.