Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, February 10, 2017

Article on Fraudulent Transfers to Trusts

Fraudulent transferAlexander A. Bove, Jr. recently published an Article entitled, Can an Incompetent Individual Make a Fraudulent Transfer?, 44 Estate Planning 23 (2017). Provided below is a summary of the Article:

Boston attorney Laurence Barrow (the estate planning equivalent of Clarence Darrow) had recently completed a complicated estate plan for one of his clients. In addition to a maze of international entities and the usual estate planning documents, the plan included a domestic asset protection trust, to be established in Ohio, and which was to hold a substantial portion of the client’s liquid assets. This seemed like a reasonable plan, as the client, Sarah Bellum, was a pediatric brain surgeon and was continually concerned about exposure to malpractice claims. 

Pleased with the plan, Sarah made an appointment to sign the documents in Attorney Barrow’s office. On the morning of the day of that appointment, Sarah was scheduled to perform surgery on a five-year-old patient. She performed the surgery, and after checking on the patient proceeded to Barrow’s office. The surgery appeared to be successful, but a short time after the patient was discharged, the child’s parents noticed some strange behavior by the child. A physician who examined the child advised the parents that the behavior could be part of the recovery process and could possibly cure itself in time, but the child should be watched. 

At Barrow’s office, Sarah reviewed and then signed all documents. It was agreed that Barrow would follow up with instructions on transferring Sarah’s assets to the Ohio trust. On the way home from Barrow’s office, however, Sarah was involved in an automobile accident, suffering a severe concussion that left her in a coma. The doctors felt she had a good chance of recovery, but they could not say when. In their own words, “It could be four weeks or four months or four years.”

Sarah’s coma turned out to last longer than four weeks or four months. She finally regained her competence after four years. As it also turned out, the child’s condition never improved since the parents obtained the second opinion, and it became clear that the child would have a mild handicap for life. Thus, a malpractice suit was brought against Sarah on behalf of the child for the child’s personal injury. In due time, the child’s suit was successful, and the child was awarded a substantial judgment for damages. In suing on the judgment, the child’s attorney asked the court to treat Sarah’s transfer of assets to the trust as a fraudulent transfer, because the child was a creditor at the time of the transfer, and the suit was brought well within the allowable time period. 



Articles, Estate Planning - Generally, Malpractice, Trusts | Permalink


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