Paterno’s Transfer May Be Voidable

Less than four months before the recent Jerry Sanduski’s sexual abuse scandal erupted, Joe Paterno transferred ownership of his house to Suzanne P. Paterno, trustee of a trust. Prior to the transfer, Joe and Suzanne Paterno jointly owned the house which is now worth $594,484.40.

If Paterno is sued and found personally liable, the house may still be available to satisfy a judgment against him if the transfer was fraudulent. A transfer is fraudulent when it is made “with intent to hinder, delay or defraud creditors.” If a court finds Paterno’s transfer was fraudulent, it can declare the transfer void, making the assets available to creditors.

Asset protection strategies (i.e. the use of state-law exemptions, trusts, FLLPs, and LLCs) can help protects assets from future creditors, but these strategies typically make it difficult, not impossible, for creditors to reach a debtor’s assets. Asset protection planning should occur before the protection is actually needed, to help avoid allegations of fraudulent transfers.

See Deborah L. Jacobs, Paterno House Transfer Won’t Shelter Him, Forbes, Nov. 16, 2011.

Note that things would be different if he lived in Texas. In Texas, the homestead (regardless of value) is totally exempt from this type of creditor – no transfer would be needed – he could keep it in his own name and it would protected.