23 PLACING YOUR ASSETS OFFSHORE AND AVOIDING FRAUDULENT TRANSFERS
There are several types of fraudulent transfers, none of which
you want to get caught doing, even unknowingly. Laws
against fraudulent transfers intend to protect the creditor
under civil law, “the people” under criminal law, and a trustee
under bankruptcy law. It may not be easy for any of them to pursue
a person who has fraudulently transferred assets; in fact, it would
have to be f inancially motivating to make it economically worthwhile.
The cost of pursuit could easily outweigh the benef its. Assets
taken out of your home country are difficult to attach, especially
once put into a corporate, trust, or other structure. But, there
could be severe civil and criminal penalties if transfers were determined
to be fraudulent. And, individuals fraudulently transferring
assets could be undermining their own plans to securely place
assets offshore.
Therefore, a person’s reason for transferring assets must have a
proper motive, such as legal tax planning, estate planning, legitimate
business plans, or other logically perceived reasons. This will create a
better argument for why assets were taken offshore if ever challenged.
But the hope should be that no creditors or bankruptcy court are
looking in the first place. Your solvency is the pivotal test of whether a
transfer was fraudulent.
Under two civil law systems, the Uniform Fraudulent Conveyances
Act (UFCA) and the Uniform Fraudulent Transfers Act (UFTA),
creditors have certain remedies and protections. To prove fraud, one
must prove intent to defraud. This is not so easy, but case law and the
UFTA provide the option of proving fraud by showing a badge of
fraud. There are 11 badges of fraud, and an indication of just one
106 BUILDING A SOLID OFFSHORE FINANCIAL FORTRESS
would raise a red flag and the possibility of fraudulent intent. A
badge of fraud is easier to determine than intent to defraud.
In constructive fraud, there is lack of fair value or consideration in
exchange for the asset being transferred. And unlike actual fraud,
there is no requirement to prove intent to defraud nor is a badge of
fraud required.
You should carefully determine your situation with potential creditors,
including spouses, and understand the structure and laws of the
country where you propose to transfer assets. These laws will vary by
country, including statutes of limitations. Get advice from a professional
if you have any doubts.