Fraudulent Conveyance

A conveyance by one spouse to the other based upon a fictitious or nominal consideration is generally treated as fraudulent if it is made to defeat the spouse's creditor's claims. However, if one spouse pays the other the market value of the property, the transfer is valid and will not be set aside as a fraudulent conveyance. Where a conveyance between spouses is made in consideration of love and affection, it is voluntary and fraudulent if it renders the debtor spouse unable to pay existing personal debts.

Property purchased in the name of one spouse (e.g., the wife), but paid for with the funds of the other (e.g., the husband), can be challenged by the husband's existing creditors. A bona fide debt due by one spouse to the other, which can be established by showing that the spouses dealt with each other as debtor and creditor, is sufficient consideration to support a conveyance of property in payment of a debt as long as the debt bears a reasonable proportion to the value of the property conveyed.

Creditors will lose their attack upon a conveyance between family members unless the transfer is for a grossly inadequate consideration and is surrounded by other circumstances that establish fraud.