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[Utah Code Table of Contents]
[TITLE 25. Table of Contents]
25-6-1 Short title.
This chapter is known as the "Uniform Fraudulent Transfer
Act."
1988
25-6-2 Definitions.
In this chapter:
(1) "Affiliate" means:
(a) a person who directly or indirectly owns, controls, or holds with power to vote, 20% or more of the outstanding voting securities of the debtor, other than a person who holds the securities:
(i) as a fiduciary or agent without sole discretionary power to vote the securities; or
(ii) solely to secure a debt, if the person has not exercised the power to vote;
(b) a corporation 20% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the debtor or a person who directly or indirectly owns, controls, or holds, with power to vote, 20% or more of the outstanding voting securities of the debtor, other than a person who holds the securities:
(i) as a fiduciary or agent without sole power to vote the securities; or
(ii) solely to secure a debt, if the person has not exercised the power to vote;
(c) a person whose business is operated by the debtor under a lease or other agreement, or a person substantially all of whose assets are controlled by the debtor; or
(d) a person who operates the debtor's business under a lease or other agreement or controls substantially all of the debtor's assets.
(2) "Asset" means property of a debtor, but does not include:
(a) property to the extent it is encumbered by a valid lien;
(b) property to the extent it is generally exempt under nonbankruptcy law; or
(c) an interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one tenant.
(3) "Claim" means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.
(4) "Creditor" means a person who has a claim.
(5) "Debt" means liability on a claim.
(6) "Debtor" means a person who is liable on a claim.
(7) "Insider" includes:
(a) if the debtor is an individual:
(i) a relative of the debtor or of a general partner of the debtor;
(ii) a partnership in which the debtor is a general partner;
(iii) a general partner in a partnership described in Subsection (7) (a) (ii);
(iv) a corporation of which the debtor is a director, officer, or person in control; or
(v) a limited liability company of which the debtor is a member or manager;
(b) if the debtor is a corporation:
(i) a director of the debtor;
(ii) an officer of the debtor;
(iii) a person in control of the debtor;
(iv) a partnership in which the debtor is a general partner;
(v) a general partner in a partnership described in Subsection (7) (b) (iv);
(vi) a limited liability company of which the debtor is a member or manager; or
(vii) a relative of a general partner, director, officer, or person in control of the debtor;
(c) if the debtor is a partnership:
(i) a general partner in the debtor;
(ii) a relative of a general partner in, a general partner of, or a person in control of the debtor;
(iii) another partnership in which the debtor is a general partner;
(iv) a general partner in a partnership described in Subsection (7) (c) (iii);
(v) a limited liability company of which the debtor is a member or manager; or
(vi) a person in control of the debtor;
(d) if the debtor is a limited liability company:
(i) a member or manager of the debtor;
(ii) another limited liability company in which the debtor is a member or manager;
(iii) a partnership in which the debtor is a general partner;
(iv) a general partner in a partnership described in Subsection (7)(d)(iii);
(v) a person in control of the debtor; or
(vi) a relative of a general partner, member, manager, or person in control of the debtor;
(e) an affiliate, or an insider of an affiliate as if the affiliate were the debtor; and
(f) a managing agent of the debtor.
(8) "Lien" means a charge against or an interest in property to secure payment of a debt or performance of an obligation, and includes a security interest created by agreement, a judicial lien obtained by legal or equitable process or proceedings, a common-law lien, or a statutory lien.
(9) "Person" means an individual, partnership, limited liability company, corporation, association, organization, government or governmental subdivision or agency, business trust, estate, trust, or any other legal or commercial entity.
(10) "Property" means anything that may be the subject of ownership.
(11) "Relative" means an individual or an individual related to a spouse, related by consanguinity within the third degree as determined by the common law, or a spouse, and includes an individual in an adoptive relationship within the third degree.
(12) "Transfer" means every mode, direct or indirect, absolute or conditional, or voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance.
(13) "Valid lien" means a lien that is effective against
the holder of a judicial lien subsequently obtained by legal
or equitable process or proceedings.
1992
25-6-3 Insolvency.
(1) A debtor is insolvent if the sum of the debtor's debts is greater than all of the debtor's assets at a fair valuation.
(2) A debtor who is generally not paying his debts as they become due is presumed to be insolvent.
(3) A partnership is insolvent under Subsection (1) if the sum of the partnership's debts is greater than the aggregate, at a fair valuation, of all of the partnership's assets and the sum of the excess of the value of each general partner's nonpartnership assets over the partner's nonpartnership debts.
(4) Assets under this section do not include property that has been transferred, concealed, or removed with intent to hinder, delay, or defraud creditors or that has been transferred in a manner making the transfer voidable under this chapter.
(5) Debts under this section do not include an obligation
to the extent it is secured by a valid lien on property of
the debtor not included as an asset.
1988
25-6-4 Value - Transfer.
(1) Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied. However, value does not include an unperformed promise made other than in the ordinary course of the promisor's business to furnish support to the debtor or another person.
(2) Under Subsection 25-6-5 (1) (b) and Section 25-6-6 , a person gives a reasonably equivalent value if the person acquires an interest of the debtor in an asset pursuant to a regularly conducted, noncollusive foreclosure sale or execution of a power of sale for the acquisition or disposition of the interest of the debtor upon default under a mortgage, deed of trust, or security agreement.
(3) A transfer is made for present value if the exchange
between the debtor and the transferee is intended by them
to be contemporaneous and is in fact substantially contemporaneous.
1988
25-6-5 Fraudulent transfer - Claim arising before or after transfer.
(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) To determine "actual intent" under Subsection (1) (a), 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.
1988
25-6-6 Fraudulent transfer - Claim arising before transfer.
(1) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if:
(a) the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation; and
(b) the debtor was insolvent at the time or became insolvent as a result of the transfer or obligation.
(2) A transfer made by a debtor is fraudulent as to a
creditor whose claim arose before the transfer was made if
the transfer was made to an insider for an antecedent debt,
the debtor was insolvent at the time, and the insider had
reasonable cause to believe that the debtor was insolvent.
1989
25-6-7 Transfer - When made.
In this chapter:
(1) A transfer is made:
(a) with respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good-faith purchaser of the asset from the debtor against whom applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee; and
(b) with respect to an asset that is not real property or that is a fixture, when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien other than under this chapter that is superior to the interest of the transferee.
(2) If applicable law permits the transfer to be perfected as provided in Subsection (1) and the transfer is not so perfected before the commencement of an action for relief under this chapter, the transfer is deemed made immediately before the commencement of the action.
(3) If applicable law does not permit the transfer to be perfected as provided in Subsection (1), the transfer is made when it becomes effective between the debtor and the transferee.
(4) A transfer is not made until the debtor has acquired rights in the asset transferred.
(5) An obligation is incurred:
(a) if oral, when it becomes effective between the parties; or
(b) if evidenced by a writing, when the writing executed
by the obligor is delivered to or for the benefit of the
obligee.
1988
25-6-8 Remedies of creditors.
(1) In an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in Section 25-6-9 , may obtain:
(a) avoidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim;
(b) an attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the procedure prescribed by the Utah Rules of Civil Procedure;
(c) subject to applicable principles of equity and in accordance with applicable rules of civil procedure:
(i) an injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;
(ii) appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or
(iii) any other relief the circumstances may require.
(2) If a creditor has obtained a judgment on a claim against
the debtor, the creditor, if the court orders, may levy execution
on the asset transferred or its proceeds.
1988
25-6-9 Good faith transfer.
(1) A transfer or obligation is not voidable under Subsection 25-6-5 (1)(a) against a person who took in good faith and for a reasonably equivalent value or against any subsequent transferee or obligee.
(2) Except as otherwise provided in this section, to the extent a transfer is voidable in an action by a creditor under Subsection 25-6-8 (1)(a), the creditor may recover judgment for the value of the asset transferred, as adjusted under Subsection (3), or the amount necessary to satisfy the creditor's claim, whichever is less. The judgment may be entered against:
(a) the first transferee of the asset or the person for whose benefit the transfer was made; or
(b) any subsequent transferee other than a good faith transferee who took for value or from any subsequent transferee.
(3) If the judgment under Subsection (2) is based upon the value of the asset transferred, the judgment must be for an amount equal to the value of the asset at the time of the transfer, subject to an adjustment as equities may require.
(4) Notwithstanding voidability of a transfer or an obligation under this chapter, a good-faith transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or obligation, to:
(a) a lien on or a right to retain any interest in the asset transferred;
(b) enforcement of any obligation incurred; or
(c) a reduction in the amount of the liability on the judgment.
(5) A transfer is not voidable under Subsection 25-6-5 (1)(b) or Section 25-6-6 if the transfer results from:
(a) termination of a lease upon default by the debtor when the termination is pursuant to the lease and applicable law; or
(b) enforcement of a security interest in compliance with Title 70A, Chapter 9a, Uniform Commercial Code - Secured Transactions.
(6) A transfer is not voidable under Subsection 25-6-6 (2):
(a) to the extent the insider gave new value to or for the benefit of the debtor after the transfer was made unless the new value was secured by a valid lien;
(b) if made in the ordinary course of business or financial affairs of the debtor and the insider; or
(c) if made pursuant to a good-faith effort to rehabilitate
the debtor and the transfer secured present value given for
that purpose as well as an antecedent debt of the debtor.
2000
25-6-10 Claim for relief - Time limits.
A claim for relief or cause of action regarding a fraudulent transfer or obligation under this chapter is extinguished unless action is brought:
(1) under Subsection 25-6-5 (1)(a), within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant;
(2) under Subsection 25-6-5 (1)(b) or 25-6-6 (1), within four years after the transfer was made or the obligation was incurred; or
(3) under Subsection
25-6-6
(2), within one year after the transfer was
made or the obligation was incurred.
1988
25-6-11 Legal principles applicable to chapter.
Unless displaced by this chapter, the principles of law
and equity, including merchant law and the law relating to
principal and agent, equitable subordination, estoppel, laches,
fraud, misrepresentation, duress, coercion, mistake, insolvency,
or other validating or invalidating cause, supplement this
chapter's provisions.
1988
25-6-12 Construction of chapter.
This chapter shall be applied and construed to effectuate
its general purpose to make uniform the law with respect
to the subject of this chapter among states enacting it.
1988
25-6-13 Applicability of chapter.
This act applies when any transfer occurs after the effective
date of this act.
1988
25-6-14 Restricting transfers of trust interests.
(1) (a) For trusts created on or after December 31, 2003, a settlor who in writing irrevocably transfers property in trust to a trust having as trustee a company defined in Subsection 7-5-1 (1)(d) who holds some or all of the trust assets in this state in a savings account described in Subsection 7-1-103 (29), a certificate of deposit, a brokerage account, a trust company fiduciary account, or account or deposit located in this state that is similar to such an account may provide that the income or principal interest of the settlor as beneficiary of the trust may not be either voluntarily or involuntarily transferred before payment or delivery to the settlor as beneficiary by the trustee. The provision shall be considered to be a restriction on the transfer of the settlor's beneficial interest in the trust that is enforceable under applicable nonbankruptcy law within the meaning of Section 541(c)(2) of the Bankruptcy Code or successor provision.
(b) This Subsection (1) applies to:
(i) any form of transfer into trust including:
(A) conveyance; or
(B) assignment; and
(ii) transfers of:
(A) personal property;
(B) interests in personal property;
(C) real property; or
(D) interests in real property.
(2) (a) Except as provided in Subsection (2)(c), if a trust has a restriction as provided in Subsection (1)(a), a creditor or other claimant of the settlor may not satisfy a claim, or liability on it, in either law or equity, out of the settlor's transfer or settlor's beneficial interest in the trust.
(b) For the purposes of Subsection (2)(a), a creditor includes one holding or seeking to enforce a judgment entered by a court or other body having adjudicative authority as well as one with a right to payment, whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.
(c) A restriction provided under Subsection (1) does not prevent a creditor or person described in Subsection (2)(a) from satisfying a claim or liability out of the settlor's beneficial interest in or transfer into trust if:
(i) the claim is a judgment, order, decree, or other legally enforceable decision or ruling resulting from a judicial, arbitration, mediation, or administrative proceeding commenced prior to or within three years after the trust is created;
(ii) the settlor's transfer into trust is made with actual intent to hinder, delay, or defraud that creditor;
(iii) the trust provides that the settlor may revoke or terminate all or part of the trust without the consent of a person who has a substantial beneficial interest in the trust and the interest would be adversely affected by the exercise of the settlor's power to revoke or terminate all or part of the trust;
(iv) the trust requires that all or a part of the trust's income or principal, or both must be distributed to the settlor as beneficiary;
(v) the claim is for a payment owed by a settlor under a child support judgment or order;
(vi) the transfer is made when the settlor is insolvent or the transfer renders the settlor insolvent;
(vii) the claim is for recovery of public assistance received by the settlor allowed under Title 26, Chapter 19, Medical Benefits Recovery Act;
(viii) the claim is a tax or other amount owed by the settlor to any governmental entity;
(ix) the claim is by a spouse or former spouse of the settlor on account of an agreement or order for the payment of support or alimony or for a division or distribution of property;
(x) (A) the settlor transferred assets into the trust that:
(I) were listed in a written representation of the settlor's assets given to a claimant to induce the claimant to enter into a transaction or agreement with the settlor; or
(II) were transferred from the settlor's control in breach of any written agreement, covenant, or security interest between the settlor and the claimant; or
(B) without limiting the claimant's right to pursue assets not held by the trust, a claimant described in Subsection (2)(c)(x)(A) may only foreclose or execute upon an asset in the trust listed in the written representation described in Subsection (2)(c)(x)(A)(I) or transferred in breach of a written agreement, covenant, or security interest as provided in Subsection (2)(c)(x)(A)(II) to the extent of the settlor's interest in that asset when it was transferred to the trust or the equivalent value of that asset at the time of foreclosure or execution if the original asset was sold or traded by the trust; or
(xi) the claim is a judgment, award, order, sentence, fine, penalty, or other determination of liability of the settlor for conduct of the settlor constituting fraud, intentional infliction of harm, or a crime.
(d) The statute of limitations for actions to satisfy a claim or liability out of the settlor's beneficial interest in or transfer into trust under Subsections (2)(c)(ii), (v), (vii), (viii), (ix), (x), and (xi) is the statute of limitations applicable to the underlying action.
(e) For the purposes of Subsection (2)(c) "revoke or terminate" does not include:
(i) a power to veto a distribution from the trust;
(ii) a testamentary special power of appointment or similar power;
(iii) the right to receive a distribution of income, principal, or both in the discretion of another, including a trustee other than the settlor, an interest in a charitable remainder unitrust or charitable remainder annuity trust as defined in Internal Revenue Code Section 664 or successor provision, or a right to receive principal subject to an ascertainable standard set forth in the trust; or
(iv) the power to appoint nonsubordinate advisers or trust protectors who can remove and appoint trustees, who can direct, consent to or disapprove distributions, or is the power to serve as an investment director or appoint an investment director under Section 75-7-906 .
(3) The satisfaction of a claim under Subsection (2)(c) is limited to that part of the trust or transfer to which it applies.
(4) (a) If a trust has a restriction as provided under Subsection (1), the restriction prevents anyone, including a person listed in Subsection (2)(a), from asserting any cause of action or claim for relief against a trustee or anyone involved in the counseling, drafting, preparation, execution, or funding of the trust for:
(i) conspiracy to commit a fraudulent conveyance;
(ii) aiding and abetting a fraudulent conveyance; or
(iii) participating in the trust transaction.
(b) A person prevented from asserting a cause of action or claim for relief under this Subsection (4) may assert a cause of action only against:
(i) the trust assets; or
(ii) the settlor or beneficiary to the extent allowed under Subsection 25-6-5 (1)(a).
(5) In any action brought under Subsection (2)(c), the burden to prove the matter by clear and convincing evidence shall be upon the creditor.
(6) For purposes of this section, the transfer shall be considered to have been made on the date the property was originally transferred in trust.
(7) The courts of this state shall have exclusive jurisdiction over any action brought under this section.
(8) If a trust or a property transfer to a trust is voided or set aside under Subsection (2)(c), the trust or property transfer shall be voided or set aside only to the extent necessary to satisfy:
(a) the settlor's debt to the creditor or other person at whose instance the trust or property transfer is voided or set aside; and
(b) the costs and attorney fees allowed by the court.
(9) If a trust or a property transfer to a trust is voided or set aside under Subsection (2)(c) and the court is satisfied that the trustee did not act in bad faith in accepting or administering the property that is the subject of the trust:
(a) the trustee has a first and paramount lien against the property that is the subject of the trust in an amount equal to the entire cost properly incurred by the trustee in a defense of the action or proceedings to void or set aside the trust or the property transfer, including attorney fees;
(b) the trust or property transfer that is voided or set aside is subject to the proper fees, costs, preexisting rights, claims, and interest of the trustee and any predecessor trustee if the trustee and predecessor trustee did not act in bad faith; and
(c) any beneficiary, including the settlor, may retain a distribution made by exercising a trust power or discretion vested in the trustee of the trust, if the power or discretion was properly exercised before the commencement of the action or proceeding to void or set aside the trust or property transfer.
(10) If at least one trustee is a trust company as defined
in Subsection
7-5-1
(1)(d), then individuals may also serve as cotrustees.
2004
