I recently was served with a lawsuit. May I transfer my assets to my spouse to avoid paying any judgment that might be entered against me?
The Tennessee case of Estate of David Holt Ralston answers a question often asked by Texas clients who are facing a lawsuit: “What if I just transfer all my property to my spouse?” Although not a Texas case, Estate of Ralston is based on the Uniform Fraudulent Transfer Act (UFTA), which has been adopted by both Tennessee and Texas.
The court in Ralston held that transfers of real property by a spouse who is facing litigation, to a spouse who was not involved in the litigation, constitutes fraud. As such the court rescinded the deeds which effectuated the transfers, thereby enabling the plaintiff in the suit against the transferring spouse to proceed against the transferred property in order to satisfy the judgment against the transferring spouse.
It is likely that the result in this case would have been the same had it been decide by a Texas court.
The Texas version of the UFTA has been codified as Chapter 24 of the Business and Commerce Code.
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