The Importance of Considering State Fraudulent Transfer Law in an Asset Protection Plan
Asset protection plans most frequently fail due to the transfers of assets into the entities of the plan being considered fraudulent transfers, and therefore being able to be set aside and undone by a creditor. A creditor must undertake to prove that a transfer was fraudulent in order to seize the assets that were transferred, and they do so with a fraudulent transfer action.
Each state differs in the fraudulent transfer law applicable to it and transactions occuring within that state. An asset protection plan ordinarily needs to consider all options open, and attempt to use choice-of-law provisions to use the fraudulent transfer law best suited for the plan. However, for those who have the assets outside of that jurisdiction, or for a creditor's lawsuit outside of that jurisdiction, it is likely that the choice-of-law provision will be disregarded and the fraudulent transfers laws of the other jurisdiction applied. Asset protection attorneys can weigh the alternatives and work with you to select the best of the fraudulent transfer laws.
Generally, the largest difference between jurisdictions is the statute of limitations, which for a fraudulent transfer means the amount of time a creditor can look back on transactions that are susceptible to a fraudulent transfer challenge. However, certain states implement the Uniform Fraudulent Conveyances Act (UFCA) instead of the Uniform Fraudulent Transfer Act (UFTA). The UFCA is an older version of the Act, with certain differences. The UFTA also generally allows for a one year period from when the transfer "was or could reasonably have been discovered" by the creditor, which is a separate statute of limitation irrespective of the general four-year statute of limitation in most states under the UFTA.
Transactions meant to "hinder, delay, or defraud creditors" are susceptible to challenges under fraudulent transfer law.
Note that 'creditors,' in context of fraudulent transfer law, means all of the following:
- Creditors "certain," meaning the ones with a judgment against a debtor and a undisputed right to collect (e.g. the government's tax lien against a debtor);
- Creditors "potential," meaning the creditors that a debtor owes and is paying on time (e.g. a mortgage holder whom the debtor is current with in payments); and
- Creditors "contingent," meaning the ones that have the ability to get a judgment against a debtor at the time of transfer that just have to sue on it and possibly win (e.g. the guy who just slipped and hurt himself on the debtor's investment property).
Only these creditors (basically anyone with a claim, even if it is contingent) will be able to claim a transfer was fraudulent.
For your reference, this is a list** of fraudulent transfer laws for each jurisdiction. Deviations from the majority of states are listed in bold:
|State||Statute(s)||Implements||Statute of Limitation|
|Alabama|| §§ 8-27-1 to 8-27-6.
||UFTA||4 years; § 8-9A-9(3)|
|Alaska||AS § 34.40.010 to 34.40.130.||Neither||4 years|
|Arizona||ARS §§ 44-1001 to 44-1010.||UFTA||4 years; § 44-1009|
|Arkansas||ACA §§ 4-59-201 to 4-59-213.||UFTA||3 years; § 4-59-209|
|California||West's Ann.Cal.Civ. Code, §§ 3439 to 3439.12.||UFTA||4 years; within 7 regardless of discovery rule, § 3439.09|
|Colorado||CRSA §§ 38-8-101 to 38-8-112||UFTA||4 years; § 38-8-110|
|Connecticut||CGSA §§ 52-552a to 52-552l.||UFTA||4 years; § 52-552j|
|Delaware||6 Del. Code §§ 1301 to 1311.||UFTA||4 years; § 1309|
|District of Columbia||DC ST §§28-3101 to 28-3111.||UFTA||4 years; § 3109|
|Florida||West's FSA §§ 726.101 to 726.112.||UFTA||4 years; § 726.110|
|Georgia||CGA § 18-2-70 to 18-2-80.||UFTA||4 years; § 9-3-35|
|Hawaii||§§ 651C-1 to 651C-10.||UFTA||4 years; § 651C-9|
|Idaho||§§ 55-910 to 55-921.||UFTA||4 years; § 55-918|
|Illinois||740 ILCS 160/1 to 160/12.||UFTA||4 years; § 10|
|Indiana||§§ 32-18-2-1 to 32-18-2-21.||UFTA||4 years; § 32-18-2-19|
|Iowa||ICA §§ 684.1 to 684.12.||UFTA||5 years; § 684.9|
|Kansas||Kan. Stat. Ann. §§ 33-201 to 33-212.||UFTA||4 years; § 33-209|
|Kentucky||KRS 378.010 to 378.100.||UFCA||5 years; 413.120 (based on fraud)|
|Louisiana||West's La. Stat. Ann. §§ 2790.1 to 2790.12, repealed 2006.
La. Civ. Code § 2036 et seq.
|UFTA Repealed||Lesser of 1 year of learning of transfer; 3 years of occurrence|
|Maine||14 M.R.S.A. §§ 3571 to 3582.||UFTA||6 years; § 3580|
|Maryland||Md. Code, Commercial Law, Title 15, Subtitle 2, §§ 15-201 to 15-214||UFCA||Likely 3 years; (based on fraud)|
|Massachusetts||MGLA c. 109A, §§ 1 to 12.||UFTA||4 years; § 10|
|Michigan||MCLA §§ 566.31 to 566.43.||UFTA||6 years; § 566.39(a)|
|Minnesota||MSA §§ 513.41 to 513.51.||UFTA||6 years; § 541.05(1)(6) (based on fraud)|
|Mississippi||Miss. Code Ann. § 15-3-101 to 15-3-121.||UFTA||3 years; § 15-3-115|
|Missouri||V.A.M.S. §§ 428.005 to 428.059.||UFTA||4 years; § 428.049|
|Montana||MCA §§ 31-2-326 to 31-2-342.||UFTA||4 years; § 31-2-341|
|Nebraska||Neb. Rev. Stat. §§ 36-701 to 36-712.||UFTA||4 years; § 36-710|
|Nevada||N.R.S. 112.140 to 112.250.||UFTA||4 years; § 112.230|
|New Hampshire||NH Rev. Stat. §§ 545-A.||UFTA||4 years; § 545-A9|
|New Jersey||NJSA §§ 25:2-20 to 25:2-34.||UFTA||4 years; § 25:2-31|
|New Mexico||NMSA §§ 56-10-14 to 56-10-25.||UFTA||4 years; § 56-10-23|
|New York||NY Debtor Creditor Law §§ 270 to 281.||UFCA||6 years; CPLR § 213(1) (per general fraud)*|
|North Carolina||NCGSA §§ 39-23.1 to 39-23.12.||UFTA||4 years; § 39-23.9|
|North Dakota||NDCC §§ 13-02.1-01 to 13-02.1-10.||UFTA||4 years; § 13-02.1-09|
|Ohio||Ohio Revised Code §§ 1336.01 to 1336.11.||UFTA||4 years; § 1336.09|
|Oklahoma||24 Ok. Stat. Ann. §§ 112 to 123.||UFTA||4 years; § 121|
|Oregon||ORS §§ 95.200 to 95.310.||UFTA||4 years; § 95.280|
|Pennsylvania||12 Pa. CSA §§5101 to 5110.||UFTA||4 years; § 5109|
|Puerto Rico||English or Spanish civil law.
31 LPRA § 3492.
|Rhode Island||Gen. Laws 1956, §§ 6-16-1 to 6-16-12.||UFTA||4 years; § 6-16-9|
|South Carolina||SC Code Ann. § 15-3-530(7).||Statute of Elizabeth||3 years; SC Code Ann. § 15-3-530(7)|
|South Dakota||SDCL 54-8A-1 to 54-8A-12.||UFTA||4 years; § 54-8A-9|
|Tennessee||§§ 66-3-301 to 66-3-315.||UFCA||4 years; § 66-3-310|
|Texas||VTCA Bus. & C. §§ 24.001 to 24.013.||UFTA||4 years; § 24.010|
|Utah||UCA 1953, 25-6-1 to 25-6-14.||UFTA||4 years; § 25-6-10|
|Vermont||9 VSA §§ 2285 to 2295.||UFTA||4 years; § 2293|
|Virgin Islands||28 VIC §§ 201 to 212.||UFCA||Unknown|
|Virginia||VA Code Ann. § 55-80.||Neither||None, only doctrine of laches|
|Washington||West's RCWA 19.40.011 to 19.40.903.||UFTA||4 years; § 19.40.091|
|West Virginia||§§ 40-1A-1 to 40-1A-12.||UFTA||4 years; § 40-1A-9|
|Wisconsin||Wisconsin Statutes §§ 242.01 to 242.11.||UFTA||4 years; § 242.09|
|Wyoming||§§ 34-14-201 to 34-14-212 (adopted 2006, formerly UFCA).||UFTA||4 years; § 34-14-210|
* Note that New York has a heightened pleading requirement for fraud, under CPLR 3016(b).
** Note that this list is provided for reference only and is no substitute for legal advice, and use of this website does not create an attorney–client relationship between us and any reader. Consult a licensed professional for advice for your situation.