Miami Team Prevails Over Bankruptcy Trustee’s Claim To Corpus of an Offshore Asset Protection Trust

July 2019

Partner Ron Neiwirth and associate Andrew Schindler successfully represented a Chapter 7 debtor in a dispute in the bankruptcy court, where his bankruptcy trustee had sued for a declaratory judgment, asking for a determination that the assets of an 18 – year – old offshore asset protection trust were property of the bankruptcy estate.

Gordon & Rees' attorneys explained that the offshore trustee was an indispensable party to any action seeking to determine title to trust assets, but the trustee had not been joined as a party. Moreover, the trust assets were all invested in annuities where the debtor was the payee of the annuities; therefore, even if the bankruptcy trustee could obtain jurisdiction over the offshore trustee, the assets themselves were exempt under applicable Florida statutes.

The court, in a memorandum decision, gave the bankruptcy trustee 60 days to decide whether to amend her complaint and to find a way to obtain personal jurisdiction over the offshore trustee.  The court also determined that the assets of the offshore trust, consisting of annuities payable to the debtor, were exempt under Florida law in any event, as was the money in an account where he had accumulated some of the annuity proceeds. The bankruptcy trustee elected not to amend. The court entered one order holding the annuities and their proceeds to be exempt, and will enter a final judgment denying the complaint for declaratory relief by reason of the failure of the bankruptcy trustee to join the indispensable party- the offshore trustee of the asset protection trust.