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After the debtor filed bankruptcy and sought to discharge $5.4M in debt, the trustee sued to avoid $4M in transfers and recover from the two trusts. Because the Apartment Trust is invalid, Briones is a voluntary trustee on a resulting trust for Michaels and his heirs.
The bankruptcy court initially found both trusts valid, but after the Trustee's motion for reconsideration, then concluded one trust was the debtor's alter ego, but that the other trust was valid since it had been created for the debtor's daughter and that it was not the alter ego of the debtor. the statute of limitations does not begin to run in favor of a voluntary trustee until he repudiates the trust." Davenport v. The statute of limitations did not begin to run until Briones repudiated the trust, that is, until he answered Goodrich's complaint and denied that the Apartment Trust's assets are property of the bankruptcy estate.
Although a creditor may not be able to pierce a trust directly, he may be able to compel a beneficiary to exercise his rights to demand payment from the trust.
For example, if a trust agreement permits a beneficiary to request payment at any time, the creditor can compel the beneficiary to request the necessary funds from the trust to pay off the debt.
Nothing stated or implied in this article should be construed to be legal, tax, or professional advice. is not a law firm and this article should not be interpreted as creating an attorney-client or legal advisor relationship.