When is a Transfer Presumed to be Fraudulent?
THE Illinois Fraudulent Transfer Act
The Illinois Fraudulent Transfer Act refers to transfers of money or property in order to avoid paying a creditor or a potential creditor. The Fraudulent Transfer Act is also called the “Voidable Transfer Act” because the transaction may be “voided” or reversed by a court.
The Fraudulent Transfer Act covers any property that “may be the subject of ownership”. This is a broad, encompassing definition that includes cash, investment accounts, as well as jewelry and vehicles. Certain transactions are presumed by the law to be fraudulent. This means that the courts will treat the transaction as a fraud and the debtor, or the person who transferred the property, must prove the transfer was not in violation of the Illinois Fraudulent Transfer Act.
How does one know if the law will presume a transfer is fraudulent? In Illinois, the courts have determined that if certain “badges of fraud” are present, then the transfer is likely fraudulent. These badges of fraud are listed in the Illinois Fraudulent Transfer Act. One “badge” is whether the transfer was concealed or done in secret. Another badge of fraud is whether the person who transferred the property still maintained control over the property. The law also considers whether the financial situation of the person who transferred the property immediately after the transfer.
On the other hand, a 2004 Bankruptcy case details how some activity that appeared to be egregious violations of the Illinois Fraudulent Transfer Act were not actually not fraudulent activity. In the case called Henbest v. Meyer (In re Meyer), 307 B.R. 87 (Bankr. N.D.Ill. 2004), the debtor was able to prove to the court that transfers to his wife did not violate the Illinois Fraudulent Transfer Act.
In the Meyer case, the debtor transferred property to his wife. These transfers occurred shortly before he was found liable for negligence in a civil lawsuit. However, the debtor explained to the judge that his wife was pregnant at the time of the transfer. As a couple, they were planning for the loss of the wife’s income after the baby was born and the transfer of property was part of this financial plan. Additionally, the debtor and his wife explained that they were acting on the advice of attorneys and financial planners in order to provide financial security for their children.
The Meyer court accepted these explanations and determined that the debtor did not intend to hide his assets from his creditors or potential creditors.
At Hays Firm, we have experienced asset protection lawyers who are knowledgeable in various asset protection techniques. We are knowledgeable in the Illinois Fraudulent Transfer Act, and this knowledge helps us advise our clients as they make plans for their financial security. The experienced estate and asset protection lawyers at Hays Firm LLC have helped many individuals to plan for and protect their financial future. Please feel free to contact us anytime to discuss how we can help.