The gift and borrow back strategy, Part 1 There is an asset protection strategy which involves giving something away and then borrowing it back again. Giving something away means it no longer belongs to you, but belongs to the person that you give it to. It is not your asset, but an asset of the gift recipient. The idea is if the gift giver were to later become bankrupt this asset will be out of reach of creditors. This can be a cheap and effective strategy to implement and was often employed in the past as an asset protection strategy. The strategy was abused by the sort of people that end up on the TV show ACA. Shonky bastards were defeating creditors. Laws were brought in to limit the ability to do this. There are 2 main laws: i) Transactions to defeat creditors ii) Clawback provisions Generally if you enter into a transaction to defeat creditors that transaction can be reversed – potentially without time limit. Clawbacks can be made on under market value transactions. A gift is under market value. These claw back provisions generally last from 2 to 4 years after the gift is made. Where someone has no creditors at the time of the gift, is solvent and is not expecting to go bankrupt and the transaction was more than 4 years ago the gift and borrow back strategy should be very strong. Even where someone is about to enter bankruptcy it may still be worth considering even though the gift may be clawed back. This is because the trustee is bankruptcy has to go to the effort and cost to get that gift back. This will give the gift giver and the recipient leverage to negotiate with creditors. Only lawyers can advise on this strategy.