Can a lawyer help a client transfer her only asset to put it beyond creditors' reach if the client says her goal is to make herself insolvent?

Plain-English summary

A client tells a lawyer she wants to render herself insolvent by transferring her only asset, held in sole ownership, into a tenancy by the entirety with her husband for no consideration, specifically to place the asset beyond her creditors' reach. The hypothetical presumes the transfer would be void under the Fraudulent Conveyance Act (Va. Code section 55-80) and voidable under the Voluntary Conveyance Act (Va. Code section 55-81).

The committee applies Rule 1.2(c), which bars a lawyer from counseling or assisting conduct the lawyer knows is criminal or fraudulent while allowing the lawyer to discuss legal consequences and to help a client make a good-faith effort to determine the law. Quoting Comment 6, the committee draws the line between presenting an analysis of questionable conduct (permitted) and recommending the means to commit a crime or fraud with impunity (prohibited).

The committee declines to decide the threshold legal question: whether a transfer described by Va. Code sections 55-80 and 55-81 actually constitutes fraud. Interpreting those statutes is outside the committee's purview, as in earlier opinions (LEO 782, LEO 1219, LEO 1222, LEO 1227) where the committee left the substantive legality to the lawyer. So the committee limits its conclusion: if the lawyer determines the proposed transfer is fraud, he cannot recommend it or assist the conveyance, and Rule 1.2(c) permits him only to explain the legal consequences, namely that the transfer would be void as to the creditors the client wishes to evade. A footnote notes the Rules use a special definition of "fraud" (conduct with a purpose to deceive, not mere negligent misrepresentation).

Currency note

This opinion was issued in 2002. Virginia's Rule 1.2 and the cited conveyance statutes may have changed since (the Code sections have since been recodified). Verify against current rules and statutes before relying on any specific provision mentioned here.

In practice

The opinion holds that, under Rule 1.2(c) as it stood at the time, the ethics question collapses into a legal one the committee will not answer: whether the transfer is fraudulent. If the lawyer concludes it is, he may neither recommend nor assist it and may only explain its consequences; if he concludes it is not fraud, the rule does not bar the assistance. The committee frames its own role as limited to that conditional guidance, not to deciding the statutes' application.

Common questions

Q: Can a lawyer help a client move assets to put them beyond creditors' reach?

A: It depends on whether the transfer is fraudulent, which the committee does not decide. Under Rule 1.2(c), if the lawyer determines the transfer is fraud he may not recommend or assist it; he may only explain the legal consequences.

Q: Does the committee decide whether this particular transfer is fraud?

A: No. The committee holds that interpreting the Fraudulent Conveyance Act and Voluntary Conveyance Act is a substantive legal question outside its purview, as in LEO 782, 1219, 1222, and 1227.

Q: What may the lawyer tell the client if the transfer is fraudulent?

A: Under Rule 1.2(c) the lawyer may explain the legal consequences, namely that the transfer would be void as to the creditors the client wants to evade.

Background and rules framework

The opinion interprets Rule 1.2(c) (Model Rule 1.2(d); a lawyer shall not counsel or assist conduct the lawyer knows is criminal or fraudulent, but may discuss legal consequences and help determine the law) and its Comment 6, which distinguishes analyzing questionable conduct from recommending the means to commit a crime or fraud. It applies the Rules' own definition of "fraud" (purpose to deceive) and references Va. Code sections 55-80 and 55-81 without interpreting them.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.2(d) / Virginia Rule 1.2(c) and Comment 6 (counseling or assisting crime or fraud)

Statutes:

• Va. Code section 55-80 (Fraudulent Conveyance Act), referenced as presumed in the hypothetical
• Va. Code section 55-81 (Voluntary Conveyance Act), referenced as presumed in the hypothetical

Other opinions cited:

• Virginia LEO 782, LEO 1219, LEO 1222, LEO 1227: where legality of conduct is a substantive legal question, the committee leaves that determination to the lawyer.

See also

• VA LEO 1840: Fraudulent Deed and Duty to Report
• VA LEO 1802: Advising Clients to Record Lawfully

Source

• Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
• Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/1771.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

LEGAL ETHICS OPINION 1771

DUTY OF ATTORNEY WHEN ASSISTING
CLIENT IN THE ISSUANCE OF A
FRAUDULENT AND VOLUNTARY
CONVEYANCE.

You have presented a hypothetical in which a client comes into the lawyer’s office seeking
legal assistance regarding the client’s plan to render herself insolvent by transferring her only
asset from sole ownership to ownership with her husband in the form of tenants by the entirety
with survivorship. The transfer would not include any consideration. The client clearly
expresses to the attorney that the client’s purpose in making this conveyance is to place her one
asset outside the reach of her creditors and, thereby, rendering herself insolvent. Your
hypothetical presumes that the conveyance would be void under the Fraudulent Conveyance Act,
Va. Code § 55-80, and voidable under the Voluntary Conveyance Act, Va. Code § 55.81.
The provision in the Rules for Professional Conduct that governs this situation is Rule 1.2 (c)
which states:
A lawyer shall not counsel a client to engage, or assist a client, in conduct that the
lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal
consequences of any proposed course of conduct with a client and may counsel or
assist a client to make a good faith effort to determine the validity, scope,
meaning, or application of the law.
Nothing in your hypothetical suggests that determination of “the validity, scope, meaning, or
application of the law” is at issue. Rather, the question posed in your scenario requires making a
distinction between counseling or assisting a client in fraudulent conduct and merely discussing
the legal consequences of proposed conduct. Comment 6 discusses that determination as
follows:
A lawyer is required to give an honest opinion about the actual consequences that
appear likely to result from a client’s conduct. The fact that a client uses advice
in a course of action that is criminal or fraudulent does not, of itself, make a
lawyer a party to the course of action. However, a lawyer may not knowingly
assist a client in criminal or fraudulent conduct. There is a critical distinction
between presenting an analysis of legal aspects of questionable conduct and
recommending the means by which a crime or fraud might be committed with
impunity.
This committee has previously applied this test to a number of situations. In most of those
situations, the committee concluded that the question rested on a substantive legal question
outside the purview of the committee. For example, in LEO 782, the committee addressed
whether it was permissible for an attorney to tell a spouse separated from, and divorcing, her
husband to enter the jointly owned home, now occupied solely by the husband, for the purposes
of removing items of personal property. The committee concluded that whether such entry was
legal was outside the purview of the committee; the committee just noted that if the conduct was
illegal, the attorney could not advise the client to do it. See, LEO 782. The committee took a
similar approach in several subsequent opinions. See, LEO 1219 (regarding whether an attorney
could arrange for one client to loan a second client money for litigation expenses in light of the
statutes addressing champerty and maintenance), LEO 1222 (regarding whether an attorney
could assist in a settlement involving secrecy about criminal acts in light of the statutes
addressing misprision of a felony), and LEO 1227 (regarding whether an attorney could assist
potential parents in certain steps toward a private adoption). In each of these LEOs, the

committee declared that a substantive legal question regarding the legality of particular conduct
was outside the purview of the committee and concluded only that should the attorney determine
the conduct in question to be illegal, he should not counsel his client to take that action.
The committee concludes that the present hypothetical presents a similarly limited issue within
the committee’s purview. A definitive conclusion as to whether the attorney in this hypothetical
can assist this client without violating Rule 1.2(c) would require an analysis of whether a transfer
described by Va. Code §§ 55.80 and/or 55.81 constitutes fraud.1 Interpretation of those statutes
is outside the purview of this committee. Accordingly, this committee must limit its conclusion
regarding this matter by opining only that if this attorney determines that the proposed transfer
constitutes fraud, he cannot recommend that transfer, nor assist his client in that conveyance.
Rather, if the attorney does determine that the proposed transfer constitutes fraud, Rule 1.2(c)
would only permit the attorney to explain the legal consequences of the client’s proposal,
namely, that the transfer would be void with regard to those creditors this client wishes to evade.
This opinion is advisory only, based only on the facts you presented and not binding on any
court or tribunal.
Committee Opinion
November 27, 2002

1 The committee notes that the Rules of Professional Conduct use a unique definition of “fraud.” “Fraud” is defined
in the Rules as “conduct having a purpose to deceive and not merely negligent misrepresentation or failure to
apprise another of relevant information.”