Before Mr. Trotman was admitted to a nursing home, he resided in a home that he owned. He had difficulty maintaining the home and paying the bills, so his daughter began paying his bills in 2007.

In December 2011, Mr. Trotman asked his daughter to assume full responsibility for the property, which then was also subject to a tax lien. She agreed, and Mr. Trotman executed a deed transferring a 99% interest in the property to her. He retained a 1% interest, as well as a life estate, in the property. At the time, Mr. Trotman was 90 years old, but was physically and mentally healthy, and he and his family did not anticipate that he would need nursing home care.

In May 2013, Mr. Trotman’s health declined and he was admitted to a nursing home. The nursing home’s fiscal agent, Future Care Consultants, contacted his daughter about applying for Medicaid. She told Future Care about the 2011 home transfer, and even gave Future Care a copy of the deed. Medicaid later imposed a 21-month penalty for the deed transfer, but Future Care allowed Mr. Trotman to remain at the nursing home and incur a debt of more than $330,000.

Then, after Mr. Trotman’s death in June 2015, Future Care sued the daughter, claiming that the 2011 deed transfer was a fraudulent transfer under New Jersey’s Uniform Fraudulent Transfer Act. Future Care also sued a close family friend of the Trotmans, who had lived at the Trotman house, expended over $200,000 in repairs to the property, and who was later deeded the property by the daughter.

At the trial, the judge found that there were four “badges of fraud” present in the case, but that the presence of these badges of fraud did not compel it to find that a fraudulent conveyance had occurred. It dismissed Future Care’s claims.

On appeal, the Appellate Division affirmed. It reviewed New Jersey’s Uniform Fraudulent Transfer Act, which was designed to prevent a debtor from cheating a creditor by placing property beyond the creditor’s reach, whether the transfer occurs before or after the debt was incurred. Under the Act, the court must (1) determine whether an asset was placed beyond the reach of a creditor and (2) whether the transfer was made with the intent to defraud the creditor. The party claiming that the transfer was fraudulent bears the burden of proving actual intent to defraud. Factors (badges of fraud) to be considered to determine the debtor’s actual intent include whether:

  1. The transfer … was to an insider;
  2. The debtor retained possession or control of the property… after the transfer;
  3. The transfer… was disclosed or concealed;
  4. Before the transfer…, the debtor had been sued or threatened with suit;
  5. The transfer was of substantially all the debtor’s assets;
  6. The debtor absconded;
  7. The debtor removed or concealed assets;
  8. The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred…;
  9. The debtor was insolvent or became insolvent shortly after the transfer…;
  10. The transfer occurred shortly before or shortly after a substantial debt was incurred; and
  11. The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

Where several of these factors are present, there is a strong inference of fraud, but that inference may be rebutted by “strong, clear evidence” of an explanation.

In affirming dismissal of Future Care’s claims, the Appellate Division found that, although factors a, b, e, and possibly h applied, they did not establish a fraudulent transfer:

To the contrary, the evidence confirms that Trotman’s intent [was] not to defraud creditors, but to relieve himself of the responsibilities associated with owning it and transfer it to his daughter, who was paying all of the bills. What [she] did with the property after the transfer… [is] irrelevant.

A copy of Future Care Consultants v. Abraham can be found here – Future Care Consultants v. Abraham