No Fraudulent Transfer of Spouse’s Separate Property

Pattie and Warren Gilbert were married in 1959. During the course of the marriage, Pattie inherited investment assets from her parents and uncle, and in 1993 she rolled those assets into a trust for the benefit of the couple’s daughter. The following year, Pattie and Warren entered into a post-nuptial agreement that defined their separate and community property, including Pattie’s separate interest in the trust assets. Shortly thereafter, Beal Bank obtained a judgment against Warren for default on a note. In 2008, the bank sued Pattie and Warren, seeking to set aside the transfer of Pattie’s inherited assets to their daughter’s trust as a fraudulent transfer. The parties filed cross-motions for summary judgment, and the trial court ruled in favor of the Gilberts. The Court of Appeals affirmed.

Property acquired during the course of a marriage is presumed to be community property, and the bank sought to take advantage of that presumption in collecting on its judgment against Warren. In this case, however, the undisputed evidence established that Pattie had inherited the assets in the trust, and that made them her separate property. The Court of Appeals also rejected the bank’s argument that interest and dividends on those assets were community property that became commingled with the separate property in the trust account. The earnings from Pattie’s separate property might have been community property, but they were “sole management” community property, and that meant they were not subject to any non-tortious liability of her spouse. Because the bank was only a creditor of Warren, and not Patttie, her transfer of those assets to the trust was not a fraudulent transfer as to the bank.

Beal Bank v. Gilbert, No. 05-12-00692-CV