A recent decision by the United States Bankruptcy Court for the District of Alaska (In Re: Thomas Mortensen, Case No. A09-00565-DMD) is clearly worth reading -- for a discussion of fraudulent conveyances, Alaska asset protection trusts, applicable statutes of limitations, and a variety of other asset protection topics. I will likely comment on this recent case in several different posts, but here is a quick initial summary.
U.S. Bankruptcy Judge Donald MacDonald IV held that a transfer by Thomas Mortensen of real estate into an Alaska asset protection trust was a fraudulent conveyance. The Judge found that there was persuasive evidence of an intent to hinder, delay and defraud present and future creditors. The Bankruptcy Judge voided the transfer of real estate to the trust as a fraudulent conveyance.
There are numerous lessons to be taken from this court decision and here are just two of them --
- Transferring assets when you are insolvent is likely to constitute a fraudulent conveyance. While Mortensen was found to be solvent at the time of the real estate transfer, his own testimony from a child support action was used against him in the bankruptcy proceeding. In a child support proceeding against his ex-wife, Mortensen took the position that his divorce had thrown him into heavy debt. This is simply a reminder that whatever you say in one court case can obviously be used against you in another!
- Think carefully about choosing the trustee of a trust. Mortensen named his brother and a personal friend as trustees of his Alaska asset protection trust, and named his mother as a "trust protector." All of these individuals were named as defendants by the Chapter 7 Bankruptcy Trustee in his adversary action against Mortensen. While it is perfectly appropriate in many instances to name family members as trustees or trust protectors, you need to consider that these individuals can sometimes be dragged into litigation.
Many court decisions are difficult to read, but the Mortensen case is fairly easy to follow. It is useful reading for anyone interested in some of the more technical aspects of fraudulent conveyances and other asset protection issues.