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 account is frozen the moment it arrives. No court order is required. A creditor who obtains a judgment on Friday can freeze the debtor’s accounts the following Monday.

A restraining notice served on a brokerage firm 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 restrained funds until the restraint is lifted or the judgment is satisfied. CPLR § 5222 exempts an amount equal to 240 times the higher of the state or federal minimum hourly wage. A bank may not restrain an account holding ninety percent of that amount or less.

New York courts also reach assets held outside the state. In Koehler v. Bank of Bermuda, 12 N.Y.3d 533 (2009), the Court of Appeals held that when a New York court has personal jurisdiction over someone, it can order that person to produce out-of-state property. The rule applies whether that person is the judgment debtor or a bank holding the debtor’s assets; the certificates in Koehler sat in Bermuda. Article 52 enforcement works through personal jurisdiction, so where the asset sits does not limit the order.

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.

• $204,825 in the highest-cost counties (the five boroughs, Nassau, Suffolk, Rockland, Westchester, and Putnam).
• $170,700 in the mid-tier counties (Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster).
• $102,400 in the remaining counties.

The Superintendent of Financial Services reset these figures on April 1, 2024 and adjusts them every three years, so the next change comes in April 2027.

These figures cover only a fraction of most downstate homeowners’ equity. A physician who owns a $1.5 million home in Westchester with no mortgage has approximately $1.3 million in exposed equity, and a creditor can force a sale to reach it. The exempt amount survives that sale for one year, long enough to buy another home and carry the exemption over. Investment properties do not qualify, 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. Under EPTL § 7-3.1(a), a transfer into a trust that the creator can benefit from is void against both existing and later creditors. New York goes further than the states that let a creditor reach only what the trustee could have distributed. The transfer into the trust does not stand at all.

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.

New York also has no domestic asset protection trust statute. Roughly twenty states have enacted DAPT laws that allow self-settled trusts to protect assets from creditors. 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. Limited Liability Company Law § 607(a) authorizes a charging lien but never says it is the creditor’s only route, so CPLR § 5225(a) remains available to compel a direct turnover of the interest itself.

The court in 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589 (1st Dep’t 2022), upheld an order requiring the sole member of an LLC to hand his entire membership interest to the judgment creditor. Forming the company elsewhere did not help him. The court refused to import Wyoming’s or Delaware’s charging-order exclusivity, holding that the internal affairs doctrine reaches a company’s dealings with its own members and stops short of claims by outside creditors.

Single-member LLCs face the most exposure. If the sole member files bankruptcy, the trustee steps into the member’s shoes, takes over management, and sells what the company owns. That was the holding in In re Ashley Albright. Bringing in a second member, usually an irrevocable trust, is the standard fix in states that limit creditors to charging orders against multi-member LLCs. New York’s statute does not make the charging order exclusive even for multi-member companies. Florida and Nevada settled that 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, and since 1996 co-op apartment shares have qualified too. When both spouses hold title as tenants by the entirety, a creditor of only one spouse cannot force a sale or partition the property. The creditor can still levy on and sell that spouse’s separate interest. A buyer at that sale gets nothing if the debtor spouse dies first. The protection lasts as long as the marriage and joint ownership continue.

Beyond co-op shares, New York does not allow personal property such as bank accounts and brokerage accounts to be held as tenants by the entirety, which leaves a married couple’s liquid savings exposed to one spouse’s creditors. Among the twenty-four states and the District of Columbia that recognize tenancy by the entirety, New York’s version is one of 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. When only one spouse faces liability and the couple’s 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, Roth IRAs, Keogh plans, and rollover accounts are exempt under New York law with no dollar cap. CPLR § 5205(c) treats these accounts as trusts funded by someone other than the debtor and makes them conclusively spendthrift, which carries the exemption into bankruptcy as well. The exemption does not cover contributions made in the 90 days before the creditor sued, or anything added afterward.

Life insurance cash value and annuity payments are protected from creditors under New York Insurance Law § 3212. The life insurance exemption runs to a third-party beneficiary, so naming the insured or the insured’s estate as payee defeats it. An annuitant who bought the contract keeps the annuity payments under § 3212(d), and no dollar cap applies. A court can still order the annuitant to hand part of those payments to a judgment creditor. Neither exemption covers premiums paid with the intent to defraud creditors.

New York’s personal property exemptions under CPLR § 5205 are modest. They cover one motor vehicle worth up to $5,500 above liens, household furniture and appliances, clothing, and tools of a trade. The separate $1,325 exemption for cash and other personal property goes only to a debtor who claims no homestead exemption, so a homeowner who claims one gets nothing from it.

New York protects wages better than personal property. CPLR § 5231 caps an income execution at 10% of gross income or 25% of disposable earnings, whichever is less. On a judgment for medical debt owed to a hospital or a licensed health care professional, New York allows no wage garnishment at all. Ninety percent of the past 60 days’ earnings stays exempt after the money reaches the bank.

A judgment debtor whose wealth sits in brokerage accounts and investments has almost nothing in CPLR § 5205 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. 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 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 only 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 controls the assets. A New York court can order the debtor to request a distribution, but the trustee is not required to comply.

Under Cook Islands law a transfer made more than two years after the creditor’s cause of action arose cannot be challenged as fraudulent. A transfer inside those two years is protected unless the creditor sued the settlor on that claim within one year after the transfer. 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.