Colorado § 38-10-111 - Trusts for use of grantor void against creditors.

§ 38-10-111. Trusts for use of grantor void against creditors.

All deeds of gift, all conveyances, and all transfers or assignments, verbal or written, of goods, chattels, or things in action, or real property, made in trust for the use of the person making the same shall be void as against the creditors existing of such person.

Source: R.S. p. 339, § 11. G.L. § 1261. G.S. § 1520. R.S. 08: § 2665. L. 21: p. 339, § 1. C.L. § 5110. CSA: C. 71, § 11. CRS 53: § 59-1-11. C.R.S. 1963: § 59-1-11.

ANNOTATION

Law reviews. For article, "An Aspect of Estate Planning in Colorado: The Revocable Inter Vivos Trust", see 43 Den. L.J. 296 (1966). For article, "Perils of Pre-Bankruptcy Planning: Transfers, Exemptions and Taxes", see 17 Colo. Law. 1513 (1988). For article, "Chapter 13 Bankruptcy as an Alternative to Chapter 7", see 18 Colo. Law. 2089 (1989). For article, "Can Some Colorado Trusts Provide Protection from Claims of Creditors?", see 28 Colo. Law. 61 (Aug. 1999).

Object of section is to invalidate transfers of property which have the effect of placing it beyond the reach of creditors of the person making the transfer, but which leave a beneficial use, control, or ownership in him. Wilson v. Am. Nat'l Bank, 7 Colo. App. 194, 42 P. 1037 (1895).

Applicability of section. This section refers to cases where the use of trust for the grantor is the principal purpose accomplished by the conveyance, and not merely an incident thereto. Campbell v. Colo. Coal & Iron Co., 9 Colo. 60, 10 P. 248 (1885).

A public welfare official is not precluded from using the state debtor and creditor law set forth in this section to set aside an allegedly fraudulent transfer so as to recover under social services law. Alberico v. Health Mgmt. Sys., Inc., 5 P.3d 967 (Colo. App. 2000).

"Things in action" include assignment of wages to be earned under a contract existing at the date of the assignment. City & County of Denver v. Jones, 85 Colo. 212, 274 P. 924 (1929).

There is no necessity of proving intent to defraud, but, if the assignment is shown to be in trust for the grantor, it is, as to existing creditors, the same as if no transfer had been made. Fulton Inv. Co. v. Smith, 27 Colo. App. 279, 149 P. 444 (1915), aff'd, 64 Colo. 33, 170 P. 1183 (1918).

Question of intention determined from facts of each case. The question of intention is one to be determined from the facts and circumstances of each case. Hunter v. Ferguson, 3 Colo. App. 287, 33 P. 82 (1893); Innis v. Carpenter, 4 Colo. App. 30, 34 P. 1011 (1893).

Express language of section invalidates conveyance to a trust as against the Colorado department of health care policy and financing ("DHF") because DHF was a creditor at the time of the transfer. Section does not provide additional or conflicting requirements for eligibility or recovery under the medicaid act. Instead, section simply invalidates conveyance to trust made when creditors have outstanding claims at the time of the conveyance. Thus, defendants' liens are valid and enforceable against the mother's residence. Alberico v. Health Mgmt. Sys., Inc., 5 P.3d 967 (Colo. App. 2000).

Where a judgment debtor had neither a legal nor an equitable interest in a property, recording a judgment does not create a lien on the property, because there is no interest on which the lien could attach. Junior creditor who successfully exposes a fraudulent transfer by filing suit takes priority over senior creditors holding judgments recorded prior to the junior creditor uncovering the fraud. Shepler v. Whalen, 119 P.3d 1084 (Colo. 2005); In re Bryan, 469 B.R. 348 (Bankr. D. Colo.), aff'd, 483 B.R. 738 (D. Colo. 2012).

Applied in Sickman v. Abernathy, 14 Colo. 174, 23 P. 447 (1890); Eppich v. Blanchard, 58 Colo. 139, 143 P. 1035 (1914); Zimmerman v. Mozer, 10 B.R. 1002 (D. Colo. 1981); In Re Baum, 22 F.3d 1014 (10th Cir. 1994).