To cheat you out of your fair share, your divorcing spouse, a business partner, an executor handling a decedent’s estate or someone else may hide assets from you. As a result of an asset search or other investigation you might uncover a money trail for these hidden assets.
If you follow the money trail & locate the assets, how do you then recover them? One way could be through a settlement with those hiding the assets from you. You might also be able to recover the assets by pursuing available legal remedies.
These remedies sometimes include proving to the Court that assets were hidden from you through nominees (i.e. intermediaries); fraudulent transfers; &/or trusts. To recover assets hidden these ways, you may have to demonstrate the following to the Court:
I. NOMINEE OWNERSHIP —‘A nominee is one who holds bare legal title to property for the benefit of another.’ In re Callahan, 442 B.R. 1, 5 (D. Mass. 2010) (quoting Black’s Law Dictionary 1076 (8th ed. 2004)). A true beneficial owner can easily hide assets by employing a nominee to make purchases &/or hold assets. To recover these assets you may have to prove nominee ownership by showing that the owner transferred assets in anticipation of a lawsuit; that the assets were transferred to the nominee although the nominee did not pay for them; etc. See e.g., Fourth Inv. LP v. United States, 720 F.3d 1058, 1070 (9th Cir. 2013) (six-part test for nominee ownership applied to tax lien case).
II. FRAUDULENT TRANSFERS—If there were badges of fraud when an asset was transferred, you might be able to recover the asset on the ground it was fraudulently transferred. The badges are used to prove fraudulent intent or an intent to hinder creditors. A fraudulent transfer is marked by the badges when assets are transferred in anticipation of a lawsuit or liability; when assets are transferred even though there is inadequate or no payment for them; etc. The badges are listed at Salomon v. Kaiser (In re Kaiser), 722 F.2d 1574 (2d Cir. 1983) and additional cases discussing them are at “Badges Of Fraud In Debt Collection, Divorce & Bankruptcy.”
III. TRUSTS—IRS Talking Points say that trusts can be misused “[t]o depreciate personal assets (such as a home)”; “[t]o deduct personal expenses”; “[t]o split income over multiple entities…”; “[t]o underreport income”; “[t]o avoid filing returns”; “to wire income overseas and fail to report it”; & “[t]o attempt to protect transactions through bank secrecy laws in tax haven countries.” If a trust is abused in these kinds of ways to hide assets, assets could conceivably be recovered from the trust.
Depending on the circumstances, you may recover trust assets by claiming the trust is only a nominee owner; or by claiming that assets were fraudulently transferred to the trust. It may also be possible to recover assets by piercing the trust veil on an alter ego theory. The gravamen of this claim would be that the individual hiding assets at the trust & the trust were inseparable. See United States v. Evseroff, No. 00-CV-06029 KAM, 2012 WL 1514860, (E.D.N.Y. Apr. 30, 2012) aff’d, 528 F. App’x 75 (2d Cir. 2013) (trust assets subject to collection/can be reached under nominee ownership, fraudulent conveyance and alter ego theories).
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