Fraudulent Transfers and Property Distribution

The division of property is an issue that is central in any divorce case. Spouses often work for years to help build and contribute to the marital estate. When a marriage ends, the court has to divide up all of the assets and debts. In New Jersey, the court will make a decision on how to divide marital assets and marital debts, and will make an equitable division of the marital estate. Equitable does not always mean exactly equal, and the court will examine a list of considerations when deciding how to divide everything between the spouses. An issue that sometimes arises in a property division case is that of a fraudulent transfer. Some unscrupulous spouses may attempt to hide or get rid of assets during a divorce in an effort to prevent the other spouse from receiving his or her equitable share of the asset.

New Jersey has passed statutes in an effort to address this very issue. New Jersey 25:2-20, et seq. contains the Uniform Fraudulent Transfer Act. The law provides that a “transfer made or obligations incurred by a debtor is fraudulent as to a creditor . . . if the debtor made the transfer or incurred the obligation . . . with the actual intent to hinder, delay, or defraud any creditor of the debtor.”  With regard to family law, this means that if, for example, the husband transfers a large asset with the intent of keeping it from the wife, this may be a fraudulent transfer. The law also provides a list of factors for courts to consider when trying to determine if a transfer was fraudulent. Some of these factors include whether the transfer was made to an insider, whether the transferring spouse still retained control over the property after the transfer, whether the spouse tried to hide the transfer, and whether the transfer was for a substantial portion of the spouse’s assets. These are just a small sampling of the factors a court may consider, and the list provided in the statute is not an exhaustive list of what a judge can consider when making this decision. There can be severe penalties for a spouse who makes fraudulent transfers in an effort to keep assets out of a divorce, including a disproportionate division of the marital estate or an award of attorney’s fees.

in helping our clients understand their rights and obligations with respect to the marital estate. Call us today at (732) 529-6937 for an appointment to talk about your property.