<\/p>\n
Last month, a Bankruptcy Court in Alaska entered a ruling against one Tom Mortensen that seemingly eviscerates asset protection trusts.<\/p>\n
The Trust Advisor Blog has provided a comprehensive update on the fallout from that ruling:<\/p>\n
Alaska is one of 13 states that allow assets to be placed in self-settled spendthrift trusts, in which the former owner gives up legal ownership of the property while retaining full access to it.<\/p>\n
Under Alaska rules, Mortensen\u2019s trust was well \u201cseasoned\u201d once the state\u2019s four-year statute of limitations was satisfied in early 2009.<\/p>\n
\u201cThat\u2019s still the case,\u201d says Doug Blattmachr, founder of Alaska Trust \u2014 which had nothing to do with the Mortensen trust. \u201cAs long as that statute runs out, you\u2019re in pretty good shape.\u201d<\/p>\n
However, when Mortensen filed for bankruptcy shortly thereafter, he exposed his trust to the 2005 revisions to the bankruptcy code, which extended the statute of limitations to a full decade in cases where the transfer seems motivated by an attempt to evade looming debts.<\/p>\n
Mortensen failed that test and automatically earned what Blattmachr calls a \u201cbadge of fraud\u201d by arguing in court that the trust was designed to defeat his creditors \u2014 the equivalent of an undocumented foreign national telling the border guards he\u2019s hoping to work under the table.<\/p>\n
As a result, the judge naturally thought his trust looked suspicious and applied the 10-year rule, so the credit card companies have a claim on the property.<\/p>\n
But it\u2019s not the end of the asset protection world, lawyers with their eye on the ball tell me.<\/p>\n
\u201cIf there was ever an illustration of how extreme facts contradict the law, this might be it,\u201d says Wisconsin estate planner Bob Keebler.<\/p>\n
\u201cThe sky is not falling on domestic asset protection trusts,\u201d he says. \u201cThis is really not a surprise to anyone.\u201d<\/p>\n
See the remainder of the article by Scott Martin at the Trust Advisor Blog<\/a>.<\/p>\n From the perspective of the bankruptcy court, a critical determination is the intent in transferring assets to the trust, that is whether the intent was to defraud creditors.<\/p>\n For the record, California, where I practice, is not one of the 13 states that allow assets to be placed in self-settled spend thrift trusts.<\/p>\n From Tom Mortensen we can learn the importance of good legal advice when confronting unusual circumstances.<\/p>\n","protected":false},"excerpt":{"rendered":" Last month, a Bankruptcy Court in Alaska entered a ruling against one Tom Mortensen that seemingly eviscerates asset protection trusts. The Trust Advisor Blog has provided a comprehensive update on the fallout from that ruling: Alaska is one of … Continue reading