Brief synopsis: Essentially it is what’s known as a “fraudulent transfer.” Though practically it may work out for you, it’s a big risk and dice toss… I wouldn’t recommend it as a lawyer because it is a risk and I cannot recommend fraudulent activity.

That being said, the practical results of these type of transfer don’t always end in any allegations of fraud. While I am specifically not recommending the fraudulent transfer of assets, I want to explore the practical side of things because practicality and law often differ in outcomes.

Lets say you have creditors (people you owe money to.) Maybe you have $100,000 in credit card debt, maybe $80,000 in unpaid medical bills – whatever it is. You have debt.

Your health is deteriorating and you’re going to pass away soon (maybe you should’ve eaten less cheesy fries). You want to leave your kids some assets and your lawyer friend tells you that if you allow your assets to go through probate, creditors will be able to come after them!

So you get this idea. What if I transfer my assets to my kids now so that way when I go to probate my executor will say “He had no money *wink wink* – sorry creditors, pound sand!”

And that’s that.

So you transfer your house, and all your money to your kids and then probate comes along after you die and your executor says… “he had no assets, sorry creditors”

A few things can happen. One is that the creditors don’t have the time or energy to explore this any more and they just don’t care. And you get away with it.

The other is that the creditors can file a civil claim against you for “fraudulent conveyance” which is very simply defined as a person who knowingly transfers assets for less than fair market value in order to default on obligations to creditors.

This is the Connecticut statute:

C.G.S.A. § 52-552f
§ 52-552f. Transfers fraudulent as to present creditors
(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

(b) A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time and the insider had reasonable cause to believe that the debtor was insolvent.

Pretty much every state has this statute, and it’s modeled after the Uniform Fraudulent Transfer Act, of 1984.

In Connecticut people usually enact these claims over substantial amounts of money. It’s rarer that creditors would bring one of these claims over something like $10,000… For one lawsuits are expensive and there’s no guarantee a creditor will win. Also, all the costs are on the plaintiff. After thousands spent on depositions, attorney’s fees, and filing fees,a creditor may lose. They may also not have the resources to pursue these types of claims. Even if it was sent to collections and an agency wants to sue you, typically they’re willing to settle for way less before even getting to significant stages of a lawsuit.

On the other hand, some creditors are aggressive, or some collections agencies are aggressive and… they may bring this civil action against you.

So, its risky..On one hand you can get a judgment and you may have to forfeit the fraudulently transferred property.

On the other hand, people do it and they get away with it. As far as I know, it isn’t a criminal offense in CT, so you might not get arrested for it. It may be covered under some criminal fraud statute, the DA might be able to show fraud in general. That would require a referral to the DA’s office and they’d have to care enough to bring criminal charges against you, which technically the transferror is guilty of it so… it would be a messy thing to prove that you were involved in a conspiracy to defraud creditors… I don’t think it would be likely, even if there was criminal liability, for the DA to come after the recipient of a fraudulently transferred gift. But why risk it?