Asset Protection Trusts in Bankruptcy Reform
The Senate version of the Bankruptcy Reform Act included a compromise amendment curbing asset protection trusts. My understanding is that compromise amendment included in a debtor's bankruptcy estate subject to distribution among creditors the debtor's beneficial interest in a self-settled asset protection trust created within the past 10 years if the debtor had the "actual intent" to evade obligations to certain government agencies and regulations, such as securities regulation. The amendment did not distinguish domestic asset protection trust from foreign trust. Although foreign trust may be maintained outside U.S. court jurisdiction, a debtor's property anywhere in the world is subject to bankruptcy court jurisdiction. Subject to further analysis, it appears that the Senate may not have impacted the effectiveness of properly created asset protection trust against most creditor claims in bankruptcy.
