Fraudulent Conveyance, Civil Conspiracy, Uniform Fraudulent Transfer Act

Posted: Sunday, April 29, 2007

by Rocco Beatrice
Estate Street Partners

Under the Uniform Fraudulent Transfer Act you would be committing a crime, see Section 19.40.041:

r> "...(a) a transfer made or obligation incurred by a debtor is fraudulent as to a creditor whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor..."

WHAT IS FRAUDULENT CONVEYANCE?

Fraudulent conveyance has to do with transferring assets at less than the "fair cash value" thereby defrauding a potential creditor or the intentional divesting of assets which become unavailable for satisfaction of the creditor's claims. Fair cash value means cash or near cash value at the time of transfer, not the price you paid for the asset.

For example, you transfer your portion of your equity in your home to your wife for $200.00 and the fair cash value of your portion of the equity was $250,000 (total value of the home was $500,000) or you transfer title to your Mercedes to your brother for $100.00. Additionally the IRS would claim that such a transfer is a gift subject to a gift tax return and assess a penalty for the non-filing of Form 709 (PDF) United States Gift (and Generation-Skipping Transfer) Tax Return.

WHAT IS CIVIL CONSPIRACY?

The "civil conspiracy theory" has been defined by the courts as (1) an agreement (2) by two or more persons (3) to perform overt act(s) (4) in furtherance of the agreement or conspiracy (5) to accomplish an unlawful purpose or a lawful purpose by unlawful means (6) causing injury to another.

To be convincing, the creditor must allege not only the conspirators committed the act but also the act was tortious in nature. The conspiracy alone is not enough to trigger a claim for civil conspiracy without the underlying tort. Lately, however, advisors have been dragged into the creditor claims as co-conspirators for suggesting and implementing everyday common asset protection strategies. This has made me more cautious, making sure that I don't get dragged in to my own legal nightmare.

EXAMPLE OF SINGLE MEMBER LLC MEMBERSHIP UNITS AND SHARES IN A PUBLIC STOCK

SINGLE MEMBER LLCs should be avoided. The example I can use is this: If you own 1,000 shares of General Motors it's considered a personal asset subject to a creditor claim. If the claim is perfected by litigation in favor of the creditor the owner of the 1,000 shares of General Motors will have to transfer those shares to the creditor in satisfaction of his claim. Owning single member units of an LLC is not any different. The Owner of the LLC membership units is equivalent to owning the 1,000 shares of General Motors and therefore subject to a perfected creditor claim.

ASSET PROTECTION: PLACING TITLE OF ASSETS IN ANOTHER LEGAL ENTITY

THE CONCEPT OF ASSET PROTECTION includes the possibility of placing title in certain assets in the name of a less vulnerable spouse or other family members, or a legal entity. One should be very attentive in transferring title without an open invitation to a "fraudulent transfer" claim against the asset transferred or the possibility of death by the spouse or family member, or possible dissolution of the marriage, or a court judgment.

The most common methods of holding assets by INDIVIDUALS:

· Joint Tenancy
· Joint Tenancy with right of survivorship
· Tenants in Common
· Tenancy by the Entirety
· Community Property

LEGAL ENTITIES (Artificial person created by application of law):

· General Partnership
· Limited Partnership
· Limited Liability Company
· Corporation under Chapter "C"
· Corporation under Sub Chapter "S"
· Revocable Trust (There are many Revocable Trust variations, since a Trust is nothing more than a Contract)
· Irrevocable Trust (There are many Irrevocable Trust variations, since a Trust is nothing more than a Contract)

To learn more about avoiding fraudulent conveyance rules and how to avoid civil conspiracy theories when repositioning assets and implementation of precise asset protection systems speak with an experienced and knowledgeable financial planner and advisor in these matters such as Estate Street Partners offering free initial consultations.

I always caution against simply speaking with only an attorney and only an accountant in complex financial planning with regards to single member LLC scenarios, partnerships in Limited Liability Company formations, regulations surrounding fraudulent conveyance and civil conspiracy and asset protection. It's best to develop or consult with a group or team consisting of an attorney, accountant and financial planner or advisor to offer you the best, well-rounded protection. You will gain a more thorough understanding of the nature of asset protection from LLC formations to avoid fraudulent conveyance and civil conspiracy judgments.

Rocco and his team of bonded professional attorneys, CPAs and accountants help affluent individuals and companies retain control of their domestic and foreign/offshore assets, protect their assets, build & preserve their wealth and financially structure their money to reduce capital gains taxes, estate taxes, inheritance taxes, avoid the probate process and decrease income taxes.
--------------------------------------------------------------------------------
Rocco Beatrice, CPA, MST, MBA, Award-winning trust & estate-planning expert
71 Commercial Street #150 Boston, MA 02109 tel: 508.429.0011 fax: 508.429.3034
Click here for more info: http://www.UltraTrust.com, http://ultratrust.com/single-member-llc.html

This Article has been viewed 1,158 times. (Not updated in real-time.)
No comments yet.

We want your comments! If you can read this, you don't have javascript enabled, so you can't use this comment system. Please enable javascript.

Other Posts by Rocco Beatrice:

Borat Lawsuits - Kazakh, Glod, Frat Boys, Etiquette Coaches Sue

Occupational Hazard Lawsuit, Workers Compensation

Single Member LLC: Charging Order, Creditor Claims, Pass-through

Gift Tax: What are the Gift Tax Exemptions?

Hide My Assets from Medicare

Divorce Asset Protection: How to Protect Your Assets During Divorce

Table of SIMPLE IRA Contribution Limits

Ways to Protect Yourself from the Lawsuit Epidemic

When Do You Pay Taxes on a Roth IRA?

Guaranteed Life Settlements Zero Coupon Bonds & When to Sell it

Home

WryteStuff Home

Terms

Privacy

Contact Rocco Beatrice

About Rocco Beatrice

Copyright 2012 IcoLogic, Inc.

Viewed from Cache.
Load time: 0.000 seconds.