How to Avoid Fraudulent Transfer Accusations in Texas

One of the biggest risks in asset protection planning is waiting too long — or making the wrong moves at the wrong time. If a court finds that you’ve transferred property to delay or avoid a creditor, the entire strategy can unravel. At Guerra Days Law Group, we help clients across Texas build asset protection plans that are not only strong — but legally defensible under both state and federal fraudulent transfer laws.

What Is a Fraudulent Transfer?

A fraudulent transfer (also called a “fraudulent conveyance”) occurs when someone transfers property with the intent to hinder, delay, or defraud a creditor. Even if you’re not committing criminal fraud, courts can reverse a transaction if it appears designed to keep assets out of reach from someone with a legal claim.

Fraudulent transfers are governed by the Texas Uniform Fraudulent Transfer Act (TUFTA) and, in bankruptcy cases, by the federal Bankruptcy Code.

Two Types of Fraudulent Transfers

1. Actual Fraud

This involves a transfer made with intent to hinder or defraud a creditor. Courts look at the surrounding facts (called “badges of fraud”) to determine whether this intent existed.

2. Constructive Fraud

This doesn’t require bad intent. If you transfer an asset for less than its fair value while you’re insolvent or close to it, the court may reverse the transfer — even if you had no intent to defraud.

Common “Badges of Fraud” in Texas

Courts consider several red flags that suggest a transfer was fraudulent:

  • The transfer was to an insider (like a family member or trust)
  • You retained control over the asset after the transfer
  • The transfer was concealed or not properly documented
  • You were being sued or threatened with a lawsuit at the time
  • You became insolvent shortly after the transfer
  • You didn’t receive reasonably equivalent value in exchange
  • The transfer occurred right before a significant debt or judgment

The presence of just one or two of these may not be enough, but multiple indicators can trigger legal action by creditors or courts.

Real-World Examples of Fraudulent Transfer

  • Case 1: A business owner transfers his vacation home to his brother for $10,000 (far below market value) one week after being served with a lawsuit.
  • Case 2: A woman places $200,000 in a trust for her children the day after a car accident that led to a personal injury claim.
  • Case 3: An investor transfers rental properties into an LLC he controls — but keeps collecting rent personally and never updates titles or records.

In each of these cases, a court may reverse the transfers and allow the creditor to seize the assets — even if they are now “owned” by someone else.

Timing Is Everything

The most effective asset protection is done before there is a problem. Once you’ve been sued or know that a claim is coming, your options are limited, and certain actions could be reversed under fraudulent transfer law. Courts may look back:

  • 2–4 years for most transfers under Texas law
  • 10 years for certain IRS-related transfers
  • 1–2 years under the federal bankruptcy code

How to Avoid Fraudulent Transfer Accusations

We help clients avoid fraudulent transfer issues through careful, proactive planning that includes:

1. Early Action

We build structures while you’re solvent and free from litigation — not after the fact. Courts are far less likely to scrutinize transfers made in the ordinary course of business before a problem arises.

2. Full Value Exchanges

If you’re transferring assets to an entity, trust, or family member, we document the exchange of fair market value or business purpose to defeat any constructive fraud claims.

3. Independent Ownership

We separate control and benefits in a way that demonstrates the asset is no longer under your direct control — such as naming a third-party trustee or independent manager.

4. Documentation & Transparency

All transfers are properly recorded, with deeds, valuations, trust agreements, and legal justifications in place to withstand audit or legal review.

5. Use of Trusts & Entities

We utilize irrevocable trusts, LLCs, and Series LLCs to house assets in a manner that reflects real legal separation — not a sham transaction.

What If You’ve Already Been Sued?

If you’re already facing a lawsuit or collection threat, your window to transfer assets legally is narrow. We may be able to:

  • Negotiate settlements with creditors to avoid aggressive enforcement
  • Explore exemptions (like the Texas homestead exemption or retirement protections)
  • Advise on permissible internal reorganizations of business assets
  • Represent you in a fraudulent transfer defense or bankruptcy proceeding

Do not attempt to transfer or hide assets without legal guidance. This can result in sanctions, court penalties, and personal liability.

Our Asset Protection Process

We design custom asset protection plans that are legally compliant and practically effective. Our process includes:

  1. Evaluating your financial picture and legal risks
  2. Creating the right combination of trusts, LLCs, and agreements
  3. Ensuring proper documentation and execution of all transfers
  4. Coordinating with your CPA or financial advisor if needed
  5. Providing ongoing compliance and legal updates

Continue Learning

This page is part of our Texas Asset Protection Series. We recommend exploring:

Protect What You Own — the Right Way

The best asset protection plans are those that work and withstand scrutiny. Let Guerra Days Law Group help you shield your property, investments, and legacy — without triggering legal backlash. We’ll help you plan smart, act early, and protect confidently.

Schedule a Confidential Consultation