If you owe a good deal of money, I am sorry to say that you can’t hide from your creditors by transferring your home out of your name. Here is a true story. In 1992, the wife was injured in a car accident when the husband was driving. The car insurer made statutory no fault benefit payments to her. However, when the insurer learned that the worker’s compensation board had also commenced payments to the wife, it made a demand for partial reimbursement because she was getting double the payments for the same accident. Two years later in 1994, the insurer commenced an action against the wife for the partial reimbursement, later obtained a judgment but could not collect on it. While the lawsuit was going on, the wife transferred her share of the matrimonial home to her husband. The deed said that it was transferred for natural love and affection and the sum of $2.00. No purchase money was paid to the wife by the husband for the conveyance.
The insurer found out and started another lawsuit under the Fraudulent Conveyance Act. This Act provides that any conveyance of property made with the intent to defeat, hinder, delay, or defraud creditors is void against those creditors. The husband claimed that the conveyance had been made with the intent of facilitating the sale of the home because the wife was starting to spend long periods of time living overseas. The home was sold to an arms-length third party in 1999 for fair market value and the husband later gave the wife half the proceeds from the sale.
The court did not accept that the home was transferred so that the husband could deal with a sale more readily in his wife’s absence. The cheque for one-half of the net proceeds of the sale to the wife demonstrated that the husband had never ceased to acknowledge his wife’s interest in the property. The court held that the conveyance of the home to the husband was void since the husband had aided his wife in sheltering from the car insurer her most visible asset. The insurer now couldn’t collect from the wife because she was long gone overseas. So, the court granted a tracing order, meaning the insurer could now collect against the assets of the husband to an amount equal to his half of the proceeds from the sale because he was involved in the nefarious conveyance.