Fraudulent conveyance: the rule that governs timing.

By Tresp, Day & Associates · January 29, 2020

This is the second in our series on asset-protection fundamentals. It covers the single most important concept in the field, the reason timing is everything.

What a fraudulent conveyance is

Under fraudulent-transfer statutes (versions of the Uniform Voidable Transactions Act), a court can unwind a transfer made with intent to hinder, delay, or defraud a creditor, or, in some cases, a transfer for less than fair value that left the debtor unable to pay known obligations. Courts look at “badges of fraud,” such as transferring assets right after a lawsuit is threatened, moving assets to insiders, or retaining control of “transferred” property.

Why it decides everything

The doctrine is the reason a last-minute transfer doesn’t work. Move assets into a trust the week you’re sued and a court can reverse it, leaving you worse off, you’ll have paid for structure that bought nothing. But assets placed in a protective structure years earlier, with no claim on the horizon, aren’t fraudulent transfers, there was no creditor to defraud.

The takeaway: plan in calm weather

Legitimate asset protection is proactive by nature. The families who are protected are the ones who planned while everything was fine, giving their structures time to season and putting them clearly outside the reach of the doctrine. Tresp, Day & Associates builds plans the right way, early, transparently, and to withstand challenge.

More in the series: types of structures and legal ownership.