Suicide is never an easy topic to discuss, especially as it relates to legal matters such as fraudulent conveyance. Taking one’s own life is a decidedly tragic event that adversely impacts the deceased’s family, friends, and even community. In addition to the heartache of losing someone to suicide, those survived by the individual often do not realize that the legal consequences related to the act can go on long after.
Learning more about a fraudulent transfer and how it relates to the Uniform Fraudulent Transfer Act may help survivors better understand the legal processes that can follow a suicide.
Understanding Fraudulent Transfers
A fraudulent transfer happens when an individual that has money or property and is about to lose that property due to some sort of judgment or creditor then transfers said property to another party. This may be done so that if a judgment or creditor tries to collect from the transferor, there is no property left to collect on.
The law recognizes this act as unjust and generally allows a creditor to proceed against the recipient of a fraudulent transfer to recover one of two things:
- The property that was transferred
- Judgment for the value of the property
Uniform Fraudulent Transfer Act
As many other states do, the state of Texas follows the Uniform Fraudulent Transfer Act. This act sets forth the circumstances and establishes the rules to be followed when analyzing if a transfer of money or property is subject to it.
There are two prongs to the Uniform Fraudulent Transfer Act including:
- Actual Intent
- Constructive Fraud
Breaking Down Actual Intent as It Relates to the Uniform Fraudulent Transfer Act
For the actual intent prong of the act, if a transferor transfers property to another individual with the express intent to hinder, delay, or defraud the transferor’s creditors it is typically considered to be a fraudulent transfer.
Actual intent may be hard for a creditor to prove as the circumstances might or might not permit a jury or judge to determine that the transferor had such intent. Factors that can be taken into consideration in determining intent are:
- A transfer was made to an insider or related party
- The debtor or transferor retains possession or control of the property after the transfer
- A transfer or obligation was concealed in what is viewed as a secret manner
- An obligation by the transferor was incurred or the transferor had been sued or threatened with a lawsuit before a transfer was made
- The transfer was substantially all of the debtor or transferor’s assets
- The debtor or transferor removed or concealed assets
- The amount of consideration received by the transferor was not of reasonable equivalent value
- The transferor was insolvent or became insolvent as a result of the transfer
Constructive Fraud and the Uniform Fraudulent Transfer Act
In the event that a creditor cannot establish the actual intent prong of the act, the constructive fraud prong of the act comes into play. Of the two prongs, constructive fraud is usually easier to prove as all that is necessary is to show the following:
- There was a transfer
- The transfer was made at the time that the debtor or transferor was insolvent
- The transfer was for less than an equivalent value in exchange for the transfer
Fraudulent Transfer Act and Suicide Case Study #1
With the knowledge of what a fraudulent transfer is and how the Fraudulent Transfer Act would come into play, it may be easier to understand how the unfortunate incident of suicide might invoke the act.
The following case study may help the reader to make better sense of this connection, however, please be forewarned that the following is tragic and somewhat gruesome and may not be appropriate for all audiences.
In this example, a husband and wife are going through an intensely contentious divorce. Amidst the divorce, the husband returns to his marital home to gather some of his belongings. In doing so, he gets into a confrontation with the wife and violence ensues, ending with the husband shooting and killing his wife before turning the gun on himself in an act of suicide.
The husband had a long-standing relationship with a girlfriend. After the separation from his wife, he and his girlfriend opened a joint bank account that had a balance of approximately half of a million dollars at the time of his death. The husband did have some credit card debt and other small creditors and essentially his entire fortune consisted of half a million dollars in the joint bank account with his girlfriend. That bank account was considered to be a joint tenancy with right of survivorship meaning that if the man died, his girlfriend and co-bank account holder would receive the money.
However, when the husband took his wife’s life, he became indebted to the wife’s estate for wrongful death. Now, at that time, there had been no transfer yet as the money was still in the account the husband and girlfriend jointly controlled.
Yet, when the husband decided to take his own life, his interests in that bank account would have transferred to the girlfriend due to the survivorship nature of the account.
In this case, a lawsuit was quickly filed and the court froze the bank account with an injunction against the distribution of the money. At a later date, a compromise was eventually reached by splitting the money between the estate of the wife and the girlfriend.
In this specific example, it is fairly clear that the suicide was in fact a fraudulent conveyance.
Fraudulent Transfer Act and Suicide Case Study #2
As with the above, the following case study may not be appropriate for all readers. It should however help the reader to better understand the connection of the Fraudulent Transfer Act to suicide.
In this second case study, a man who admittedly had many mental problems transferred the entire contents of his bank account, which was one million dollars, to his sister on Wednesday. On Thursday, the sister discovers the funds and is confused, so she tries to get in touch with her brother. She is unable to reach him and since she lives in a different city than the brother, she cannot go immediately to check on him.
In the meantime, a neighbor goes to check on the brother. At the moment the neighbor knocks on the door, the brother had just completed writing his suicide note. After hearing the knocking, the brother shoots three bullets through the door injuring the neighbor. The brother then takes his own life by suicide.
The neighbor eventually sues the sister alleging she is the recipient of a fraudulent conveyance or transfer. The brother had no debts and still owned some property even after he transferred the money to his sister, making him decidedly not insolvent. Therefore, this lack of insolvency does not satisfy the constructive fraud prong of the Fraudulent Conveyance Act.
At the time the brother transferred the money, it preceded the actual injury to the neighbor. The transfer happened before the liability or intentional and negligent act which injured the neighbor occurred. Therefore, the neighbor tried to invoke the actual intent prong of the act to force the sister to return the one million dollars.
The invocation of the prong was not successful because the neighbor needed to prove the brother had the actual intent to occur debt. While there was sufficient evidence the brother planned to commit suicide when he made the monetary transfer to his sister, there was little evidence to suggest he intended to incur any other debt including the injury to the neighbor, which seemed to be more of a consequence of unfortunate timing.
In the end, the neighbor accepted a settlement for a relatively token amount of money, the case was resolved, and the sister managed to keep most of the money her brother transferred to her.
Suicide is a delicate subject that is seldom easy to discuss, but it does create real legal issues that can cause conflict between the recipient of a transfer and those who might try to collect a judgment or claim against the deceased party who made the transfer.
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