Fraudulent
conveyance is a very
important concept when
it comes to protecting
your assets from creditor
attack. To commit a fraudulent
conveyance means that
you intended to defraud
or delay creditors. It
also means that you lacked
the financial means to
pay off a debt or deliberately
made your property inaccessible
to confuse or delay creditors
or placed your property
in a location beyond
your creditor's reach.
It can’t be suggested
strongly enough that
you check with your attorney
about the Bankruptcy
Code, the Uniform Fraudulent
Conveyances Act (UFCA)
and the Uniform Fraudulent
Transfers Act (UFTA).
The
more these questions
are answered in the
positive, then the
more the likelihood
that you’ll be found
to to have fraudulently
conveyed (or transferred)
the property. A symbol
of fraudulent conveyance
is simply an indicator
of what may have happened.
A U.S. court might
find that someone had
the intent to defraud
a creditor by confirming
several of the following
badges of fraud:
*
Did the debtor know,
or inform anyone, that
he was going to be
sued?
* Were the debtor’s financial difficulties or legal problems readily or easily
foreseeable?
* Was the asset transferred to the trust or corporation?
* Does the plaintiff have an interest in the property?
* Does the asset transfer or the debtor fall within the statute of limitations
of the Bankruptcy code, Uniform Fraudulent Conveyances Act (UFCA) or the Uniform
Fraudulent Transfers Act (UFTA)?
* Was the intention of the debtor to delay, hinder or defraud a creditor?
* Did the debtor lack sufficient financial means to meet his debts after the
asset transfer?
* How secret was the transaction?
* How does the debtor's financial situation change before and after the transfer
of assets to the trust or corporation?
* What does the timing or sequence of financial events indicate or imply?
* What is the cumulative effect of these transfers?
* Are close friends or family members parties in the transactions?
* After the property was conveyed, did the debtor remain in control or retain
possession of it?
* Did the debtor run off after he conveyed the property?
* Did the asset transfer make up most or all of the assets?
* Did the debtor become insolvent after he conveyed the property?
* Did the debtor intentionally incur debt that he could not pay?
The
major threat to any
asset protection plan
is procrastination.
By sitting back and
waiting, the debtor
loses precious time.
And
time is one advantage
protecting the debtor
from a fraudulent conveyance
claim. As time passes,
transferring assets
into the trust or corporation
becomes secure. To
put it simply, creditors
cannot assert that
you transferred the
assets into the trust,
or corporation, to
commit fraud. Furthermore,
creditors cannot claim
that the assets are
in the trust or corporation
to prevent them from
having access to the
assets. In short, time
works to your advantage
when the asset protection
plan was implemented
well in advance of
financial or legal
difficulties because
it demonstrates a lack
of intent to frustrate
creditors or commit
fraud.
In
order to prevent a
fraudulent conveyance
claim, you have to
do the following:
*
Establish your asset
protection plan as
soon as you possibly
can.
* Implement the plan when the legal and financial seas are calm (i.e., before
you are sued or in trouble with any creditor.)
* Hold on to enough assets outside the asset protection plan to meet you financial
obligations as well as maintaining your solvency. You need to have enough money
to live and function
* Finally, when in trouble, think about the corporation as your fall back position.
If
you would like more
information regarding
asset protection, trusts,
family limited partnerships
or the subject of this
article please call
or email our office.
