Sometimes A Fraudulent Transfer Is The Best Asset Protection Plan
Asset protection planning sometimes involves knowing and purposeful fraudulent conveyances. An attorney from south Florida called me recently to discuss the following plan he would propose to his client. His client, a married man, was a defendant in a civil suit. The judge had just granted the creditor’s motion for summary judgment, and the judge would probably enter a final judgment as soon as the creditor submitted proof of damages.
The man owned a one-acre lot upon which he was constructing a house to be his future homestead. The problem is that the court would be entering a final money judgment before the house was completed and occupied. The final judgment would be automatically a lien on the lot. Subsequent occupancy as a homestead would not remove the pre-existing lien.The attorney wanted to know if he should advise the client to quit-claim deed the lot to his wife for the remainder of construction and then have it conveyed to joint ownership when the couple moved in as their new homestead. I think the plan would work.
Without doubt the man’s conveyance of title to his wife at this point is a fraudulent transfer. The remedy is reversal and possible a judgment against the spouse. But, the fraudulent transfer remedy is not immediate and automatic upon record of the creditor’s anticipated money judgment. The creditor will have to discover the transaction, file a motion, and get a hearing date before a judge to hear the motion. The debtor’s counsel can defend and extend the time. By the time a court declares the quit-claim deed to be a fraudulent transfer house construction will be complete and the debtor will occupy the home as his homestead.
The creditor’s judgment will not have become a lien on the house titled in the wife’s name prior to occupancy as homestead and the property should be saved. Most times an obvious fraudulent conveyance will cause more harm then good; but sometimes, like this attorney’s example, a fraudulent conveyance is the best solution.
