What Are Fraudulent Transfers? How Do You Avoid Them and Still Protect Your Assets?

When you have worked hard to accumulate assets for you and your family, you must take proactive steps to protect those assets from unexpected creditors, while still avoiding fraudulent transfers. Unfortunately, an unanticipated civil lawsuit, a failed business, or a business dispute can lead to judgments in which creditors try to reach your assets for payment. While you can and should utilize mechanisms to protect your assets, preferably well in advance of any financial troubles, you also should be aware of the potential for fraudulent transfers. An asset protection attorney at Kramer Green can help you protect your assets and counter any allegations of fraudulent transfers.

Defining Fraudulent Transfers

Florida Statutes Chapter 726 governs fraudulent transfers, which occur when you transfer assets in your name to try and financially harm a creditor, either by removing the creditor’s access or delaying access to the assets. The fraudulent transfer can be concerning a current or future creditor.

Under state law, a creditor can sue a person to undo an allegedly fraudulent transfer for up to four years after the transfer takes place. Once that four-year timeframe has lapsed, the transfer generally becomes immune from any allegations of fraudulent transfer.

Permissible Transfers of Assets

Not all transfers of assets are fraudulent simply because you owe debts or are at risk of being sued. You have the right under the state constitution to freely control, administer, and transfer your property and assets. These rights include the right to engage in prudent and reasonable tax, financial, and estate planning. Whether or not a transfer was fraudulent depends on your primary purpose and intent behind the transfer or if the transfer causes you to become insolvent.

However, your reasons for transferring assets must be both reasonable and credible.  If it is more likely that you transferred the assets into the trust to avoid creditors, you may have engaged in a fraudulent transfer.

Several factors help a court determine whether a transfer is fraudulent, including the following:

  • Whether the transfer was made to a family member;
  • Whether the asset or the transfer was purposely hidden from creditors;
  • Who maintains the use of the asset;
  • Who maintains possession or control over the asset;
  • Whether the person had been sued or threatened with a lawsuit before the transfer;
  • Whether the transfer occurred shortly before or after the person incurred a substantial debt;
  • Whether the person absconded;
  • If the person is now insolvent after the transfer of the asset; and
  • Whether the person received fair market value for the transfer of the asset.

Consequences of Fraudulent Transfers

Even if a court later determines that you have engaged in a fraudulent transfer, it is not illegal. Florida law does not impose damages, fines, or penalties against individuals who fraudulently transfer assets. Generally, the only remedy that creditors have is a limited equitable remedy to “undo” the fraudulent transfer and restore the asset to the original owner, which then subjects it to the collection process by the creditor. The creditor can sue the transferor of the asset and the transferee or the person who received the asset claiming that the transfer was fraudulent.

Fraudulent transfers have more serious consequences in the context of federal bankruptcy laws. In that situation, a fraudulent transfer could cause you to be unable to discharge your debts in bankruptcy.

We Can Help You Protect Your Assets

An asset protection lawyer at the law firm of Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. has the skills and knowledge necessary to represent you in all asset protection needs, including matters related to fraudulent conveyances. Call our office today at (954) 966-2112 or reach out to us online to set up an appointment and learn more about our legal services.

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