In a situation where a person is deeply in debt and creditors are threatening to take his assets in order to pay for what’s owed, it sometimes happens that the debtor will, in an effort to prevent this from happening, transfer the assets to someone else. This isn’t done in the sense of a legitimate sale or gift, but rather just in an effort to keep the creditors from getting the assets. In many cases, the assets are transferred to a friend or family member who is involved in the situation; after the crisis has passed, the debtor can once again take possession of the assets, even if they remain legally in the name of the other person. In the United States, there’s a rule in place to prevent this, with the idea that such false transfers not only cost creditors money, but they, in turn, end up costing taxpayers, too, and creating economic complications for everyone. All but a few of the states have adopted what is known as the Uniform Fraudulent Transfer Act (UFTA), which is used to investigate and prosecute such actions of fraud.
Understanding Quit Claim Deeds and the Uniform Fraudulent Transfer Act
Along with these types of situations, you’ll often find the use of what is known as a quit-claim deed.
- While a quit-claim is a perfectly legal document, it’s used so often in connection with this type of fraud that it is often considered suspect as a rule, and thus quit-claims are often involved in a case being investigated by upholders of UFTA.
- A quit-claim deed is simply a statement that one person, who has previously had ownership in a piece of property, is no longer interested in having it. The quit-claim signs all rights to the property over to someone else. It’s often used in situations such as divorces, where a couple may have both had interest in a house; the quit-claim can be signed by the husband to give the house over to the wife, or vice versa.
- As you can imagine, those attempting to do a fraudulent transfer in order to hide their assets from creditors can, and often do, sign a quit-claim deed to hand the property over to someone else in a quick, simple way, thus successfully keeping the property from being seized.
If you are in a legal situation dealing with a quit-claim deed in any capacity, you should be prepared to answer questions about the legality of the transfer; similarly, you should investigate any quit-claims that come to you to ensure they’re valid. The UFTA regulations will likely be involved in such an investigation, too, since UFTA violations and quit-claim deeds are so often found going hand in hand. Hiring a lawyer is strongly recommended so you can be sure you do not get yourself into serious financial and legal trouble by trying to use a quit claim deed in violation of the Uniform Fraudulent Transfer Act.