What Counts as an Illegal Asset Transfer in Texas?
One of the most misunderstood areas of Texas civil law involves fraudulent transfers—situations where a debtor moves property or money to avoid creditors. Texas has codified this doctrine under the Texas Uniform Fraudulent Transfer Act (TUFTA), found in Chapter 24 of the Texas Business & Commerce Code.
TUFTA applies far beyond bankruptcy cases. It regularly appears in divorce litigation, creditor lawsuits, business disputes, and estate planning gone wrong.
The Purpose of TUFTA
The statute exists to prevent a debtor from placing assets beyond the reach of creditors while still enjoying the benefits of ownership. TUFTA does not require criminal fraud—only certain prohibited financial behavior.
Under Tex. Bus. & Com. Code § 24.005, a transfer may be fraudulent even if the debtor insists they acted in “good faith.”
Two Types of Fraudulent Transfers
1. Actual Fraud
Under § 24.005(a)(1), a transfer is fraudulent if it is made “with actual intent to hinder, delay, or defraud any creditor.”
Because intent is rarely admitted, courts look to statutory “badges of fraud,” including:
- Transfer to an insider (spouse, family member, closely-held entity)
- Retention of possession or control after transfer
- Concealment of the transfer
- Transfer after being sued or threatened with suit
- Transfer of substantially all assets
- Insolvency shortly after the transfer
These badges are listed directly in § 24.005(b) and are heavily litigated.
2. Constructive Fraud
Actual intent is not required under § 24.005(a)(2)and § 24.006.
A transfer may be fraudulent if:
- The debtor did not receive reasonably equivalent value, and
- The debtor was insolvent at the time or became insolvent as a result
This is where many people get trapped. You can commit a fraudulent transfer without meaning to do anything wrong.
What Counts as a “Transfer”?
TUFTA defines transfer broadly. Under § 24.002(12), it includes:
- Selling property
- Gifting assets
- Assigning interests
- Moving money between accounts
- Transferring assets into an LLC or trust
This definition is why TUFTA frequently overlaps with:
- Divorce property disputes
- Asset-protection planning
- Closely-held business restructuring
Remedies Available to Creditors
If a transfer is fraudulent, courts have broad powers under § 24.008, including:
- Avoiding the transfer entirely
- Attaching or levying on the transferred asset
- Enjoining further disposition
- Appointing a receiver
- Awarding money judgments against transferees
Notably, liability can extend to third parties who received the asset—especially insiders.
Statute of Limitations
TUFTA claims are subject to strict deadlines under § 24.010:
- 4 years after the transfer, or
- 1 year after the transfer was or could reasonably have been discovered (for actual fraud)
Miss the deadline, and the claim is gone—regardless of how obvious the misconduct was.
TUFTA in Real Life: Where It Commonly Appears
TUFTA issues frequently arise in:
- Divorces involving hidden assets
- Business owners moving assets pre-lawsuit
- Transfers to family members for “old debts”
- Estate planning done under creditor pressure
- LLC formations used as asset shields
Many defendants learn too late that asset protection done after trouble starts is often unlawful.
Final Thought
Texas allows aggressive planning—but not reactive asset hiding. TUFTA gives courts wide latitude to unwind transactions that look legitimate on paper but improper in context.
If you are dealing with a disputed transfer, timing, value, and intent matter far more than labels.
At David C. Barsalou, Attorney at Law, PLLC, we help clients navigate business, family, tax, estate planning, and real estate matters ranging from document drafting to litigation with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call us at (713) 397-4678, email barsalou.law@gmail.com, or reach us through our Contact Page. We’re here to help you take the next step.