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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33481
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I have a question concerning asset protection trusts going

Resolved Question:

I have a question concerning asset protection trusts going into bankruptcy.

Utah has asset protection laws for trusts:
http://webster.utahbar.org/barjournal/2010/03
/domestic_asset_protection_trus.html

There is a four year limit for claims from creditors on the uniform fraudulent transfer act. However, how does this apply in a Utah bankruptcy?

The SOFA asks for any assets transferred into a trust in the last 10 years. How well protected is a trust asset in a Utah bankruptcy?

If we look at Utah exemptions I can't find anything that talks about trusts. I suppose the trust should be protected from creditors because it's no longer my asset, but the Statement of Financial Affairs asks a couple questions about trusts.

My feeling is a well designed trust could protect someone from creditors during litigation, but does it provide any immunity during a bankruptcy? Does the trustee have the power to seize my self settled trust to pay creditors during bankruptcy?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 1 year ago.
There is a four year limit for claims from creditors on the uniform fraudulent transfer act. However, how does this apply in a Utah bankruptcy?

A: The trustee can sue a third party to recover bankruptcy estate property transferred in exchange for less than "reasonably equivalent value." The UFTA operates inside and outside of bankruptcy the same manner.

The SOFA asks for any assets transferred into a trust in the last 10 years. How well protected is a trust asset in a Utah bankruptcy?

A: Bankr. Code 548(e)(1) permits the trustee to set aside a self-settled trust transfer within 10 years of creation, if:

  • (A) such transfer was made to a self-settled trust or similar device;
  • (B) such transfer was by the debtor;
  • (C) the debtor is a beneficiary of such trust or similar device; and
  • (D) the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted.

If we look at Utah exemptions I can't find anything that talks about trusts. I suppose the trust should be protected from creditors because it's no longer my asset, but the Statement of Financial Affairs asks a couple questions about trusts.

My feeling is a well designed trust could protect someone from creditors during litigation, but does it provide any immunity during a bankruptcy? Does the trustee have the power to seize my self settled trust to pay creditors during bankruptcy?

A: The only trust that cannot be avoided by the bankruptcy trustee is a spendthrift trust created by a third party where the debtor is the beneficiary and the trustee of the spendthrift trust is empowered to refuse to distribute assets to a third party creditor of the beneficiary under the trust provisions. Bankr. Code 541(c)(2).

Hope this helps.

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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33481
Experience: Attorney and Real Estate Broker -- Retired (mostly)
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