Fraudulent transfers

Anytime you convey an asset in order to defraud or delay a legitimate individual, you are committing fraudulent conveyance. If you are aware that your assets are at risk and could be used to satisfy a legal obligation and you move that asset out of reach, you committed a crime.

This includes moving your assets into an asset protection vehicle in the heat of legal battle. Asset protection must be conducted when you are not at risk. This means that you are conveying your assets at the time you asset protection plan is created, not when you are in a legal situation, therefore it is no longer fraudulent.

1. Transferred your property.
2. Received less than fair market value for the property, and
3. The transfer left you unable to satisfy a creditor

It must be all three of these to be fraudulent transfer of your property. Creditors have their own process to convince a court that your assets should be within their reach by proving that your transfer was fraudulent. There are various paths a creditor can take to your assets in these types of cases which supports the biggest point in asset protection; act now when there is no legal duress.
Fraudulent transfer laws are based on the principle that your property constructively belongs to a creditor if you are unable to satisfy your obligations as a debtor. In order to establish this there are a couple of questions that must be answered;

1. What represents fair market value or fair consideration? and
2. At what point do you become insolvent?

Addressing the first question, fair market value and consideration for your property is what you can reasonably sell your property for. Not necessarily the exact price your property is worth, but what you can reasonably expect to gain from selling your property. Case law suggests that around 70% of the property’s value is reasonable. If assets are transferred for less than fair market value, there are a couple of outcomes in this case;

1. The transferee can return the property in exchange for their purchase price
2. The transferee can be forced to pay the difference between the price they paid and the property’s full value

When the property is purchased for fair value and the transferee had no knowledge of fraudulent intent, he or she is fully protected. Courts scrutinize exchanges of services for property and only services rendered at the time of the exchange or previously suffice; a guarantee of future services does not succeed.

The second point is: At what point do you become insolvent? If your property is transferred and you still have the ability to satisfy a creditor, there isn’t any fraudulent transfer of assets. You become insolvent when your assets are not sufficient to satisfy existing debt. You can gift your property, however you must be able to satisfy your obligations as a debtor with your remaining wealth.

When there is no clear case of actual fraud, a creditor will look to prove fraud through circumstances that imply fraudulent intent. To whom did you give your assets? Was the transfer private and did the transferee have any information that would make the courts believe that the transfer was fraudulent? If you are ever faced with a legal storm where your assets are jeopardized, you may have to defend challenges to your property or assets being transferred for less than fair value. This is especially the case if the transfer left you insolvent to satisfy your obligation.
Fraudulent transfer can become indisputable within statutes of limitations. The strongest asset protection is a plan that has been in place for several years before it is needed. Although laws vary in each state, most of them have a 4 year statute of limitations for fraudulent transfer, or 1 year after the discovery of a transfer. In the case of Bankruptcy, property transfers in the previous year will most likely be examined closely for intent to delay or hinder a creditor. If you commit fraudulent transfer of your property, your Bankruptcy proceedings could be unpleasant, as the court could refuse to release you of other debts, based on your conduct.
Be selective when you choose who receives your property. Your transferee can become involved very quickly if it is discovered that they were involved in fraudulent conveyance of your property. This means that they could be forced to return the property, or if they transferred it again, they could be liable to repay the amount of the property, or worse, find themselves in a criminal court case, in some states. It is rare that civil or criminal charges result from transfer of assets unless there is a clear case of deception or bad faith.

If the court finds basis for raising fraudulent transfer of your property, the outcome is essentially to restore the debtor to his or her position, prior to the transfer of property. This can get complicated if the property is no longer recoverable. The transferee and debtor can be held jointly liable for the property value as well as the creditor’s attorney fees for recovering the value of the property.

Establish your entire asset protection plan and create the tools and vehicles you will use. Place your assets into these containers and then the owner of the assets is the legal structure. You can set up your asset protection plan so that it can be activated when you are in a legal battle. This is the key to properly creating an asset protection strategy, you do this when you don’t have to, set up all of your tools and move your assets legally and when you need to, you activate your asset protection plan and your wealth is protected.
You can activate your asset protection plan all the way into a legal battle and your assets are moved out of reach of the U.S. legal system – only if you set up your asset protection before you need it. There are some things that can be done after legal action has started, it just gets more complicated.

Transfer your property for reasons other than delaying or hindering a creditor.
Seek experienced help in your Asset Protection Planning.
The best way to avoid a lawsuit is if your assets are held in a skilled protection plan before the need arises, you could very well weather a legal storm that would otherwise destroy your lifetime accumulated wealth. The attorney’s at the law office of Castiglia-Rubinstein can put together a proper plan to protect you and your families assets. Call the law offices of Castiglia-Rubinstein at 631-465-0444.
We are dedicated to your success — so contact us. Speak with one of our knowledgeable Long Island Creditor and fraudulent conveyance litigation attorneys today from wherever you are in New York in Nassau and Suffolk, Brooklyn, Kings and Queens Counties, on Long Island and all New York City boroughs including Bronx, Westchester, Richmond County, and Manhattan. Call 631-465-0444 today.