Uniform Voidable Transactions Act (UVTA) Threatens Asset Protection Planning

The UVTA has been enacted in several states. The Act is a reworking of fraudulent conveyance law, which allows a creditor to avoid transfers made that attempt to put property beyond the reach of a creditor. A number of attorneys and others are beginning to realize that the UVTA is a threat to debtor protections that might exist outside of the UVTA.

For example, Section 10(b) of the Act reads “[a] claim for relief in the nature of the claim for relief under this Act is governed by the local law of the jurisdiction in which the debtor is located when the transfer is made or the obligation is incurred.” Thus, if a resident of a state without domestic asset protection trust provisions settles such a trust in another state, the settlor may not be able to rely on the law of that other state to protect himself or herself against a voidable transaction claim – Section 10(b), if applicable, would arguably require that the law of the home state of the debtor would instead apply. If that home state fraudulent conveyance…