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Case Study on the Uniform Fraudulent Transfers Act


Illinois has adopted the Uniform Fraudulent Transfers Act, (UFTA), 740 ILCS 160/1, et seq., which enables a creditor to obtain a court order voiding transfers of money that were made in order to avoid a judgement. The purpose of the UFTA is to “invalidate otherwise sanctioned transactions made with a fraudulent intent.” The UFTA may also apply to transfers between families, and may have harsh results to families who do not have a proper estate plan in place. 

In the bankruptcy case In re Zeigler, 320 B.R. 362 (2005), an elderly Illinois couple transferred their home to their daughter and son-in-law. The couple stated that the transfer was an attempt to create an estate plan, due to their health concerns and due to their age. At the time that the couple transferred the home, they had $18,000.00 in credit card debt and only $2,000.00 of liquid assets. The couple also suffered from severe health problems and had incurred large medical bills. The home was their primary and most valuable asset. 

Due to their outstanding debts, the elderly couple filed bankruptcy three (3) years after the property was transferred to the couple’s children. During the bankruptcy proceedings, the court ruled that the transfer of the home was “constructively fraudulent” under the UFTA. And, even though the entire family lived in the home, the court ruled that the property could be sold to satisfy the elderly couple’s death. 

The bankruptcy court looked to the following factors to determine that the transfer of the home was fraudulent: 

  1. The couple voluntarily transferred the home to their daughter and son-in-law; 
  2. At the time of the transfer, the couple had debts owed to other parties; 
  3. The couple did not receive a reasonable value from the daughter and son-in-law in exchange for the home; and
  4. After the home was transferred, the couple did not have enough assets to pay their outstanding debts. 

Although this case is from 2005, the issues facing elderly couples exist today, nearly 15 years later. Many couples face mounting medical expenses which creates problems for them to pay their other bills. Effective estate planning may have helped the elderly couple in In re Zeigler. The bankruptcy noted that “the act of transferring the Property… only caused them problems and failed to help them effectively plan their estate.”

If you or your family member is dealing with a situation similar to the one described in this article, please contact one of our attorneys to discuss which estate planning tools may be of use. Ideally, estate planning should be completed prior to a catastrophic event. If you or your family member is concerned about the potential for a future similar to the couple described, it is best to create an estate plan now rather than attempting to move assets after a financial crisis occurs. 

Please reach out to one of our experienced Estate Planning attorneys for a free thirty (30) minute consultation to discuss your family’s concerns and goals.