REV And LLC Interests

LLC_Interests Value REV Revllcinterests

It is an article of faith among asset protection planners that a debtor can transfer assets to an LLC (or partnership) in exchange for LLC (or partnership) interests, and such will ipso facto constitute REV. This is simply false.

Because an LLC interest is not assignable, and a creditor will end up with no more than a charging order which places a lien on any distributions from that interest, the LLC or partnership interest received by the debtor will almost never constitute REV because of the "utility to creditors" test which views value through the eyes of creditors.

Example: Debtor transfers $1 million to an LLC in exchange for an LLC interest worth $1 million. Before the transfer, the creditor could simply levy on the $1 million and take it. After the transfer, the creditor is limited to a charging order against the LLC which redirects any distributions paid from the LLC to the debtor's interest to the creditor instead. This is not equivalent value, since the value of the future distributions (if any) is not equivalent when measured by the utility to creditors.

Similar games which debtors try to play, almost always unsuccessfully, include adding a new member to the LLC so that it becomes a multiple-member LLC (this reduces the value of the debtor's interest as a single-member), using the LLC to pay personal expenses of the debtor, etc. Even the conversion of a corporation (the shares of which are subject to levy) to an LLC can be a voidable transaction for this same reason.


  • 2018.08.13 ... Late-Arriving Member To LLC Results In Fraudulent Transfer Finding And Punitive Damages In Lacava
  • 2015.03.31 ... The Common But False Myth Of The Asset-For-LLC Interest Exchange In Asset Protection Planning
  • 2011.09.27 ... Schofield-Johnson: Husband's Failed Attempt To Shield Assets From The IRS By Transferring To Wife Who Transferred To An LLC