Lobb & Plewe Attorneys At Law

Fraudulent conveyance concerns: A lesson from the Bridge Trust

Some asset protection promoters endorse an onshore-offshore trust strategy. The trust begins onshore in the United States and shifts offshore at the first sign of a potential creditor. Such strategies initially hold assets in a U.S. entity or domestic asset protection trust structure such as a self-settled trust and then shift or transfer to an offshore jurisdiction when a creditor appears. One such branded trust is popularly sold by promoters as "The Bridge Trust."

Courts have always taken a dim view of assets being transferred offshore to avoid creditors. There are numerous cases where transfers to foreign asset protection trusts were deemed to be fraudulent and not only have assets been frozen and seized, but people have gone to jail. The definition of a fraudulent conveyance is transferring assets to a third party to shield them from a creditor. The movement of assets from a U.S. trust structure to a Cooks Island trust and a resident trustee in a foreign jurisdiction when a creditor appears is starting to be viewed as a classic fraudulent transfer by the courts.

The structure of The Bridge Trust was successfully attacked in a recent case. In Indiana Investors v. Victor Fink, No. 12-CH-02253 (Circuit Court of Cook County, Illinois, Chancery Division), Victor Fink set up and funded what appeared to be a U.S. domestic trust. He was told by the promoters he could shift the assets to a Cook Islands trust in the "event of a duress." The plaintiffs were able to obtain temporary restraining orders which prevented the trustees and protectors from shifting control of the assets to the offshore trustee. The plaintiffs were also able to freeze all of the trust bank accounts. Other courts are starting to follow this result.

Additionally, if the U.S. trustee allows assets to be liquidated into the foreign jurisdiction and then relinquishes control over those assets, the U.S. trustee could very likely be held in contempt of court if the U.S. trustee does not repatriate those assets to satisfy a creditor. There is ample existing case law to draw this conclusion. If the U.S. trustee simply resigns after the assets are transferred, the U.S. trustee is still not in the clear. The U.S. trustee may still be held in contempt if the necessary orders are in place or subject to an action for fraudulent conveyance with attending claims for punitive damages.

The Passage Trust does not have an elaborate scheme to defraud creditors. It is a structure and not just a trust, but it does not require the transfer of assets to avoid creditors in case of duress. Assets may change form over time without transferring and clearly never transfer just to harm a creditor. It employs the highest level of asset protection available without inflaming trial lawyers and judges by playing hide and seek with assets in offshore jurisdictions known to be the playground of criminals and unscrupulous debtors. If the structure is followed properly, the rules attending fraudulent conveyances should never come into play. At the same time, greedy trial lawyers will not be able to take your assets.

No Comments

Leave a comment
Comment Information
Email Us For a Response

Find Out More About Us

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Corona Office
4160 Temescal Canyon Rd.
Suite 202
Corona, CA 92883

Phone: 951-335-0465
Phone: 951-788-9410
Fax: 951-788-0766
Corona Law Office Map

Murrieta Office
25240 Hancock Ave.
Suite 315
Murrieta, CA 92562

Phone: 951-600-1007
Fax: 951-600-1116
Murrieta Law Office Map

Las Vegas Office
9205 W. Russell Rd.
Suite 240
Las Vegas, NV 89148

Phone: 702-622-8451
Fax: 702-441-0231
Las Vegas Law Office Map

office image office image office image