Real estate agents are discussing the terms of signing contracts, legal agreements, land purchases, mortgages and home rentals.

Be careful how you plan. 

Consider the case of a married couple who were sued over a contract and lost. The Court entered a monetary judgment against them for over $100,000.   

The couple promptly deeded properties to their two children. The children paid them less than the property’s value. The transaction left the couple insolvent.  

The couple had cleverly protected their assets, right?   

Wrong. The couple and their children ran straight into the statutory buzzsaw known as TUFTA, the Texas Uniform Fraudulent Transfer Act.   

What is TUFTA?

The purpose of TUFTA is to prevent debtors from defrauding creditors by placing assets beyond their reach. The statute is incredibly broad. You can act in a genuine belief that what you plan is fair and lawful, and still violate TUFTA. Your conduct can be malum prohibitum: wrong simply because it has been prohibited by statute. It does not have to be inherently or morally wrong.  

That’s bad for you because it means your creditor does not have to prove that you intended to defraud him. Instead, your creditor just has to prove several “badges of fraud.” Any combination will do. 

Badges of Fraud

The badges are:  

  • You transferred the asset to an insider (such as a family member)
  • You retained control of the property afterward
  • The transfer or the assets were concealed from the creditor
  • You had been sued or threatened with suit before the transfer
  • You transferred substantially all of your assets
  • You absconded
  • The transfer was not for reasonably equivalent value
  • You were insolvent or became insolvent shortly afterward
  • You lack credibility
  • You lied on bankruptcy schedules
  • The transfer occurred shortly before or after you incurred a substantial debt  

Understanding the Ins and Outs of TUFTA

There is a shortcut. If the creditor can show that you were insolvent and that the transfer was not for reasonably equivalent value, or that you were insolvent and the transfer was to an insider, then you lose. 

What is “Insolvent?”

The creditor has to show that your debts exceeded your assets or, more simply, that you generally were not paying your debts as they became due.  

Who Gets Sued in a TUFTA Case? 

You, the first transferee of the assets, and a subsequent transferee of the assets. The creditor could also sue any additional parties who assisted or were involved in the transaction and benefited from it. Charities can even be sued if you transfer assets to them in violation of TUFTA.

The Definition of “Transfer” is All-Encompassing

The statute explains the term “means every mode, direct or indirect, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, and creation of alien or other encumbrance.”  That leaves no wiggle room. 

What Happens if You Lose Your TUFTA Case

Now for the painful part. If you are sued under TUFTA and lose, the Court could void the transaction, grant writs, order a receivership, and grant money damages, costs, and attorneys’ fees. 

That folks is why most attorneys, bankers, and financial advisors will not assist you in hiding assets from an existing creditor. They won’t form an LLC or other entity to hold your assets, draft a transfer document such as a deed or assignment, or create certain types of trusts. They simply do not want the liability. 

Get Expert Advice About TUFTA from Hammerle Finley Law Firm

Remember our married couple? The Appeals Court found they violated TUFTA and remanded their case to the trial court to assess attorneys’ fees and to consider execution on the properties, which can all be seen in Corpus v. Arriaga. If you have questions about or want to avoid facing TUFTA, contact the experts at Hammerle Finley Law Firm today to schedule a consultation.

You don’t want to mess with TUFTA. 

Virginia Hammerle is an accredited estate planner and represents clients in estate planning, probate, guardianship, and contested litigation. She may be reached at This blog contains general information only and does not constitute legal advice.