Legal Definitions - counterletter

A counterletter is a private document that records the true intentions of parties who have entered into a public or "simulated" contract. While the public contract presents one set of terms or ownership, the counterletter clarifies the actual, underlying agreement or ownership arrangement between the original parties. This document serves to record the real understanding, which might be different from what is outwardly presented.

Here are some examples to illustrate this concept:

• Business Asset Protection: Imagine a small business owner facing significant financial difficulties and potential lawsuits. To protect a valuable piece of equipment, they enter into a formal "sale" agreement with a trusted friend, transferring ownership of the equipment to the friend. However, simultaneously, they both sign a counterletter stating that the sale is not genuine, the original owner retains true ownership, and the friend is merely holding the equipment temporarily until the financial issues are resolved. The counterletter here reveals the true, temporary nature of the transfer, despite the public appearance of a sale.

• Disguised Loan as a Gift: A parent wants to help their adult child purchase a home but prefers to keep the financial arrangement private from other family members or for tax planning purposes. They formally "gift" a large sum of money to the child, executing all necessary paperwork for a gift. At the same time, they both sign a counterletter specifying that this "gift" is, in fact, a loan with an agreed-upon repayment schedule and interest rate. This counterletter clarifies the true financial obligation between parent and child, which differs from the public declaration of a gift.

• Temporary Property Transfer for Eligibility: An individual needs to appear to have fewer assets to qualify for a specific government benefit or a needs-based scholarship. They formally transfer ownership of a valuable antique car to a sibling. Concurrently, they sign a counterletter with the sibling, confirming that the transfer is temporary, and the original owner will regain full ownership once the eligibility period passes or the benefit is secured. The counterletter here documents the actual, temporary nature of the ownership change, which is distinct from the permanent transfer suggested by the public documents.