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A common strategy that can be helpful in the right situation

In some circumstances, a small business owner or entrepreneur may take his or her house or other assets and transfer it to his or her spouse in order to protect the house or other assets from creditors.  This has been held to work by certain courts in certain situations.  It is not a perfect strategy and will not work in all instances, but it does have the potential to protect a house or other assets.

Our advice is as follows:

Important Tip You must give up control to protect your house when transferring to your spouse.
  1. Transfers to your spouse can work and should be considered as a viable asset protection strategy
  2. The transfer should be made when there is no insolvency or anticipation of litigation relating to the transferring spouse
  3. The transferring spouse should transfer the house or other assets pursuant to a quitclaim deed or similar instrument
  4. The deed (in the case of real estate) should be recorded
  5. The transferring spouse should give up all control of the house – (for example, not use it to borrow against to benefit the business in the future)
  6. There should be some consideration given to purposes for the transfer beyond merely protection of assets – so, for example, it should also be part of some estate planning purposes (avoiding probate, making it easier to sell if the transferring spouse dies first, etc.)
  7. If there is an opportunity for the receiving spouse to pay some type of financial consideration for the house or other assets, it would make the case much stronger

Our advice is based on the following cases and law:

In one case, In re Taylor, decided by the 10th Circuit Court of Appeals under Utah law, the court found that creditors could not reach the house.  In this case, the following facts were important:

  • The house was transferred while the transferring spouse was solvent
  • There was no anticipation of litigation
  • There were no contradictory actions showing that the transferring spouse still maintained title to the home
  • The transferring spouse continued to live in the house
  • The transferring spouse paid taxes, insurance and utility bills on the house (and ultimately co-signed a mortgage on the house) but the court characterized these things as contributions in return for the ability to keep living in the house
  • The original transfer was done after the transferring spouse had a heart attack and was put in place because of estate planning and inheritance tax concerns
  • The transfer was a gift
  • Both spouses co-signed a line of credit secured by the home used for living expenses


However, in another case, In re McGavin, also decided under Utah law, the 10th Circuit Court of Appeals held that the home was subject to creditors.  In this case, many of the facts were similar to the prior case, but:

  • The transferring spouse continued to control the home
  • The transferring spouse used the home as collateral for proceeds he controlled and used for personal and business transactions on his behalf


In Colorado, Leverage Leasing Co. v. Smith, the Colorado Court of Appeals also held that a transferred home was subject to the creditors of the transferring spouse when the transferring spouse received no consideration for the transfer and the transfer rendered the transferring spouse insolvent.

Colorado has adopted a specific statue to deal with matters such as this:

§ 38-8-105. Transfers fraudulent as to present and future creditors

_(1) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(a) With actual intent to hinder, delay, or defraud any creditor of the debtor; or

(b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

(I) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

(II) Intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due.

(2) In determining actual intent under paragraph (a) of subsection (1) of this section, consideration may be given, among other factors, to whether:

(a) The transfer or obligation was to an insider;

(b) The debtor retained possession or control of the property transferred after the transfer;

(c) The transfer or obligation was disclosed or concealed;

(d) Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;

(e) The transfer was of substantially all the debtor's assets;

(f) The debtor absconded;

(g) The debtor removed or concealed assets;

(h) The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;

(i) The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

(j) The transfer occurred shortly before or shortly after a substantial debt was incurred; and

(k) The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

Additional Information
Important Tip: 
You must give up control to protect your house when transferring to your spouse.
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Asset Protection Strategies