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Fraudulent Transfers in Divorce

Fraudulent Transfers in Divorce

A fraudulent transfer is a transaction one person makes to frustrate another person’s legitimate claim to an asset. In divorce, fraudulent transfers occur when one spouse deals away property he controls to prevent the court from counting it and distributing it to the other spouse.  Fraudulent transfers are illegal, of course, but they can be tricky to discover and difficult to “unwind.” However, a spouse with a legitimate claim to a transferred asset can compel even a good-faith recipient to return the property.

For example, a husband anticipates that his wife is going to file for divorce. They’ve discussed selling a vacation cabin that he bought with marital assets, so he figures a quick sale won’t raise any red flags. He makes the sale for roughly what he paid for it back in the day, but significantly less than current market value.  The buyer is a prospective client, who is so happy with the deal that he signs a big contract with the husband’s company.  The husband’s also happy, because the profit he made from the sale — his deal with the client — won’t come through until after the divorce, so he won’t have to share any of the proceeds with his wife. That is, unless she finds out.

Because the husband originally bought the cabin with marital assets, the cabin itself is part of the marital estate, so all proceeds from the sale go into the marital estate for equitable distribution. But the proceeds of the sale don’t tell the whole story.

If the wife discovers that the sale of the cabin was for below market value and was motivated by the husband’s desire to cheat her out of marital property, she can allege fraudulent transfer. If the court agrees, there are three possible remedies:

  • The court will impute the market value of the house to the transaction and hold the husband responsible to the wife for the shortfall.
  • The court will consider the new business contract as part of the marital estate and order those profits to be split with the wife.
  • The court will void the sale to the client and return the cabin to the marital estate for equitable distribution.

The court will rarely unwind a transaction to a good-faith buyer if there is another way to compensate the defrauded party. But transactions to close friends or family members who are co-conspirators can be voided depending on the totality of the circumstances.

Should You Move Out of Your Home During a Divorce?

There are a lot of potentially stressful issues that you will encounter during your divorce, not the least of which is the choice of whether you should move out of your home during the process. Your home could possibly be your most valuable asset, and you have likely built up a lot of sentimental attachment to it as well.

So what are some things that you should consider when deciding whether to move out?

  • Your personal comfort and safety. If you believe that you would be in any danger by staying in your home, the choice is a no-brainer — get out as soon as you can, and take your children with you. If you are concerned about domestic violence, there is also the option to ask a judge to order your abusive spouse to move away. If the issue is simply that you are uncomfortable and that continuing to live together with your spouse would pose some challenges, then you need to consider potential custody and property arrangements.
  • Child custody. The primary custody-related dilemma is that if you move out without your children, your ex could portray the situation as you causing a disruption in their lives. You can avoid potentially being penalized by writing down a parenting agreement before either parent moves out, with a clear-cut schedule and an agreement that neither parent is giving up custody rights. You can also ask the courts to create such a schedule if you and your spouse cannot come to an agreement.
  • Property concerns. Who will get the house after the divorce? As soon as you leave, your chances of keeping the property significantly decline. However, another major factor in determining who gets the house is the financial standing of each spouse. Higher-earning spouses that move out will still be expected to pay some household expenses, but even then, the lesser-earning spouse may not have enough money to hang on to the home.

Free Consultation with Divorce Lawyer in Utah

If you have a question about divorce law or if you need to start or defend against a divorce case in Utah call Ascent Law at (801) 676-5506. We will fight for you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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Michael Anderson

About the Author

People who want a lot of Bull go to a Butcher. People who want results navigating a complex legal field go to a Lawyer that they can trust. That’s where I come in. I am Michael Anderson, an Attorney in the Salt Lake area focusing on the needs of the Average Joe wanting a better life for him and his family. I’m the Lawyer you can trust. I grew up in Utah and love it here. I am a Father to three, a Husband to one, and an Entrepreneur. I understand the feelings of joy each of those roles bring, and I understand the feeling of disappointment, fear, and regret when things go wrong. I attended the University of Utah where I received a B.A. degree in 2010 and a J.D. in 2014. I have focused my practice in Wills, Trusts, Real Estate, and Business Law. I love the thrill of helping clients secure their future, leaving a real legacy to their children. Unfortunately when problems arise with families. I also practice Family Law, with a focus on keeping relationships between the soon to be Ex’s civil for the benefit of their children and allowing both to walk away quickly with their heads held high. Before you worry too much about losing everything that you have worked for, before you permit yourself to be bullied by your soon to be ex, before you shed one more tear in silence, call me. I’m the Lawyer you can trust.