Trusts and Fraud

by | May 4, 2016 | Cracking the Tax Code with Christy | 0 comments

A trust won’t protect property when it’s used for fraudulent purposes.  Last year, a couple who owned a funeral parlor placed business assets into a trust in order to avoid federal tax liens.  Despite the debt, the couple continued operating the funeral parlor using the trust assets.  According to the court, the trust was a sham, as the couple intentionally transferred the business property to the trust to avoid creditors.   The court found that the transfer allowed the couple to enjoy the benefit of the assets, resulting in fraud. The Court held the couple liable for unpaid taxes, penalties, and interest, and attached a federal lien to their interest in the property held by the trust. United States v. Thompson, No. 8:13-CV-00180.

(Adapted from a case summary by Christy Lee, which appeared in an issue of the American Bar Association Probate and Property Magazine.)