The Supreme Court of Georgia partially overturned a judgment of the trial court omitting from the marital estate, on equitable division, $3.2 million of marital assets transferred by husband into irrevocable trusts during the marriage. The Court found that $1.3 million of those assets should not have been excluded from the marital estate. As the Court determined, the Trust Code of May 2010, and current law as codified in O.C.G.A. § 53-12-25(a), require a trustee to hold legal title to both real and personal property in order for that property to be validly transferred into trust. Because bank accounts into which husband transferred the assets in question were not titled in the trustee’s name, the Court held that those accounts remained part of the marital estate and subject to equitable division in the parties’ divorce action.

The Court also confirmed that Georgia’s Uniform Fraudulent Transfers Act, as amended in 2014 and renamed the Uniform Voidable Transactions Act, applies to divorce. If marital assets are fraudulently transferred into trusts, a trial court can void those transfers under the Act’s provisions and restore the assets for equitable division. Whether a husband transfers assets into trust with actual intent to defraud his wife are questions of fact, which a trial court may resolve through analysis of “badges of fraud” listed in the Act.

The Court further acknowledged that spouses in this state “generally enjoy a confidential relationship that entitles one to trust the other.” That confidential relationship applies to all marriages as a matter of law. The Court did not define what the requirements of disclosure should be in the case of transfers of large sums of assets to trusts. The Court did suggest, however, that this is a fact question for the judge or jury and that the “size and circumstances of the financial transactions at issue here could give rise to some suggestion of fraud.”

Gibson v. Gibson, et al., S17F0593 (June 5, 2017)

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