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Uniform Fraudulent Transfer Act May Apply to Premarital Agreement

In Sturm v. Moyer, 32 Cal. App. 5th 299 (February 15, 2019), the California Court of Appeal ("COA") addressed a question of first impression and held that, assuming fraudulent intent, the Uniform Voidable Transactions Act, formerly known as the Uniform Fraudulent Transfer Act ("UFTA"), can apply to a premarital agreement in which the prospective spouses agree that upon marriage, each spouse's earnings, income and other property acquired during marriage will be that spouse's separate property. In this case, the plaintiff had obtained a non-dischargeability judgment against the husband debtor in bankruptcy. During a judgment debtor examination, plaintiff discovered that the defendants had entered into a premarital settlement agreement after the judgment was entered providing that each party's earnings and income, and any property acquired during the marriage by either spouse, would be that spouse's separate property. Typically, pursuant to Fam. Code § 910, the community estate would be liable for debt incurred by either spouse prior to marriage (unless the spouses comply with the provisions of Fam. Code § 911). The plaintiff filed an action under UFTA to set aside the alleged transfer of the husband debtor's community property interest in his wife's earnings and income pursuant to the premarital agreement. The COA looked at (1) the statutory language of the UFTA (which suggests that a premarital agreement effects a transfer given the broad definition of transfer), (2) the legislative history of the UFTA and the relevant portions of the Family Code, and (3) public policy considerations (protecting the rights of creditors from fraudulent transfers), to determine that the UFTA applies to premarital agreements. 

If you have any questions, please contact Rika M. Kido, Esq., or any of the other attorneys at Shulman Bastian LLP at (949) 340-3400. For the full opinion, please click here.

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