Court finds that Assets transferred to an Alaska Asset Protection Trust are reachable in Bankruptcy Creditor Protection

In Battley v. Mortensen, Adv. D. Alaska, No. A09-90036-DMD, the Court focused whether the grantor of the trust, Mortensen, intended to hinder, delay or defraud his creditors by establishing the Alaska Domestic Asset Protection Trust and transferring land to it.  The court applied Section 548(e) of the Bankruptcy Abuse Protection and Consumer Protection Act of 2005, which voids transfers if made within 10 years of the bankruptcy filing. 

Mortensen created the Alaska asset protection trust in 2005, naming himself and his children as the trust beneficiaries.  Mortensen expressly stated that the purpose of the trust was to “maximize the protection of the trust estate or estates from creditors’ claims of the Grantor or any beneficiary and to minimize all wealth transfer taxes.”  Mortensen transferred land to the trust and four years later filed for bankruptcy.  The court easily found that the Mortensen trust was a self-settled asset protection trust created to defraud creditors.