For a transfer to be a fraudulent transfer via constructive fraud according to UFTA (Uniform Fraudulent Transfer Act), it must say "YES" both of these questions:
(1) Was there no exchange of reasonably equivalent value?
FUFTA does not define “reasonably equivalent value.” Accordingly, whether value is reasonably equivalent must be determined on a case-by case basis. In re Dondi Fin. Corp, 119 B.R. 106, 109 (Bankr. N.D. Tex. 1990). The determination of whether a debtor has received reasonably equivalent value in exchange for the transfer of his assets requires a factual analysis. In re Chase & Sanborn Corp., 904 F.2d 588 (11th Cir. 1990). “Value” has been interpreted fairly broadly, and has been defined as a comparison between “what went out” with “what was received.” In re Dealers Agency Services, Inc., 380 B.R. 608, 619 (Bankr. M.D. Fla. 2007) quoting In re Leneve, 341 B.R. 53, 57 (Bankr. S.D. Fla. 2006). Therefore, the focus is on the “economic reality” of the situation. In re Miami General Hosp., Inc., 124 B.R. 383, 394 (Bankr. S.D. Fla. 1991) (analyzing the reasonably equivalent value provided to the debtor even in the case of “indirect” benefits to the financial strength of the debtor). In this regard, courts consider many factors, including the good faith of the parties, the disparity between the fair value of the property and what the debtor actually received, and whether the transaction was at arm’s length. See e.g. In re Dealers, 380 B.R. 608; In re Vilsack, 356 B.R. 546 (Bank. S.D. Fla. 2006).
(2) Did the transfer render the debtor insolvent?
Under UFTA, a debtor is considered “insolvent” when the “sum of the debtor’s debts is greater than all of the debtor’s assets at fair valuation.” Fla. Stat. § 726.103(1). This definition is known as the “balance sheet test.” Additionally, there is a presumption of insolvency when a debtor “is generally not paying his or her debts as they become due.” Fla. Stat. § 726.103(2). In other words, “Cash Flow” insolvency gives rise to a presumption of “insolvency” under FUFTA.
EXPLANATIONS:
(1) Even Beneficial Interest Certificates and Capital Interest Certificates with no par value assessed are still an equivalent exchange because they may grow in value when the trust finally vests.
(2) It is best to enter into a Private Security Agreement in exchange for certain services (i.e. website hosting, marketing, etc.) for the indebtedness of another in a UCC-1 Agreement. Do not greatly surpass the amount of assets owned by the debtor, simply update the UCC-1 whenever more assets are obtained - and sign another PSA for other various services.
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