Is Transfer of Money To Foreign Bank Account A Fraudulent Transfer?

Jon Alper Fraudulent Transfers

A client asked me if transferring money to an offshore bank account after a creditor filed a collection lawsuit is a fraudulent transfer. Not all actions to protect assets from known creditors fall withing the scope of the fraudulent transfer statues. To the point, moving the location of an asset is not the same as a transfer of an asset.

The word “transfer” is a defined legal term in Florida’s fraudulent conveyance law. The statute defines “transfer’, generally stated, as the disposing or parting with an asset or an interest in an asset. If a debtor wires money from the debtor’s Florida bank account to the same debtor’s bank account located in another country, or even another state, the debtor has not “transferred” the money. There is no recipient of the money other than the same debtor- there is no transferee.

If the debtor transferred money from a Florida bank to, for example, an offshore trust or offshore LLC then a transfer would have occurred because the transferee, the trust or LLC, is a person other than the debtor himself.

What if the debtor creates a new offshore LLC in an asset protection jurisdiction to conduct business or make new investments. The debtor admits the purpose of forming the LLC out of the county is to protect future earnings from judgment creditors. Forming the LLC is not a transfer. Providing start up capital for the new entity may be a fraudulent transfer from the debtor to the new LLC. However, if the debtor capitalizes the entity with otherwise exempt assets, or money from an exempt financial account, the transfer to the entity would not be “fraudulent” because the law permits transfers of exempt assets that are protected from creditors prior to the transfer.

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