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Fraudulent Tranfer of Assets

When creating an asset protection plan one must be extremely careful to transfer the assets prior to any problem (such as a lawsuit) occurring. The reason for this is rule is stated below.

A fraudulent transfer of assets occurs when assets are transferred with the intention of ‘hindering delaying or defrauding’ your creditors. If a transfer is determined to be fraudulent a court will unwind it. Asset protection plans that are created and executed years in advance of need will survive any creditor attack. You should not wait for a problem to arise and then consider creating an asset protection plan.

Asset protection plans must be structured and implemented years in advance of any potential problem. If a plan is set up the day after a judgment the plan has no value. A court may also apply the Badges of Fraud in determining if the transfer was fraudulent. It is difficult to prove your intent. So the badges of fraud are used to try and sort things out. When an individual or business attempts to hide assets which are the subject of a debt collection, divorce, or bankruptcy case, a Court will look for badges of fraud. The badges of fraud for fraudulent asset transfers are:

• A Close Relationship Between The Parties

• A Transfer Apart from the Regular Course Of Business

• Inadequate Consideration

• Knowledge Of A Creditor’s Claim

• Retention Of Control Of The Property

If the badges of fraud are found to be true then the court may move to have the assets placed back into the hands of the original owner where the creditors can move to attach the asset. That is why it is important to set up an asset protection plan in advance.


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