**Fraudulent Conveyance** (noun) — The transfer of property or assets with the intent to delay, hinder, or defraud creditors, or a transfer made for inadequate consideration when the transferor is insolvent or will become insolvent as a result of the transfer.
A fraudulent conveyance is when someone transfers property or assets to avoid paying their debts. If you know creditors are coming after you and you give your house to your sister "for free" so creditors can't take it, that's a fraudulent conveyance. Courts can reverse these transfers and make the property available to pay your debts.
Fraudulent conveyance doesn't always require actual fraud or bad intent. Even without dishonest intent, a transfer can be considered fraudulent if you gave away property for less than it's worth while you were insolvent (unable to pay your debts) or if the transfer made you insolvent. The law protects creditors from both deliberate schemes and reckless transfers that leave insufficient assets to pay debts.
Courts look at several factors to identify fraudulent conveyances: Was the transfer to a family member or insider? Was it for inadequate value? Did the transferor retain some control or benefit? Was the transferor insolvent or facing financial difficulty? Was the transfer made shortly before or after a major debt arose? Multiple red flags suggest the transfer was fraudulent.
⏱ When you'll encounter this term
Fraudulent conveyance issues often arise in estate planning when someone tries to protect assets from creditors by transferring them to family members. While legitimate asset protection planning exists, simply giving everything away to avoid creditors doesn't work. Courts can reach back and undo these transfers, making the property available to satisfy debts.
The time period for challenging fraudulent conveyances varies by jurisdiction but is typically several years. If you transferred your house to your daughter five years ago and you now die with significant debts, creditors might challenge that transfer as fraudulent if you received nothing in return and evidence suggests you transferred it to keep it from creditors.
Fraudulent conveyance laws also affect lifetime gifts in estate planning. If someone makes large gifts shortly before death while insolvent or knowing they're dying with significant debts, those gifts might be challenged as fraudulent conveyances. Creditors can sometimes require beneficiaries to return gifted property to pay the deceased's debts. This is why it's important to address debts properly rather than trying to hide assets through transfers.
**Related terms:** [Creditor](/dictionary/creditor), [Insolvency](/dictionary/insolvent), [Asset Protection](/dictionary/asset-protection-trust)
---
Learn More
Related Dictionary Terms
Common Questions