Rensin: Pigs Get Fat, But What About a Hippo – How an FTC Judgment, a Transported Offshore Trust and Florida Annuity Purchases All Caused the Perfect Storm for a Unique and Noteworthy Bankruptcy Court Opinion

In In re Rensin, the judge found that an old and cold asset protection trust formed in the Cook Islands and moved to Belize was subject to Florida law and not protected from the creditors of a Florida resident who was the settlor and beneficiary, but also found that monies that were recently added to the trust, and used by the trustee to buy a creditor exempt annuity, could not be attached.  The reasoning was that the debtor himself did not engage in a transfer to avoid creditors, so that the Florida Fraudulent Transfer Statute did not apply.

The trust, which was formed and originally funded well before the debtor allegedly engaged in deceptive trade practices in a business that advertised for individuals with poor credit to buy computers over time caused over $14,000,000 dollars of debt owed to the FTC that could not be discharged, has so far managed to preserve over $2,000,000 that the asset protection trust invested in customized Cayman Islands annuity contracts.  This apparently favorable result occurred despite the judge ruling that Florida law would apply to the Belize Trust, and that creditors would have been able to reach the trust assets if they were not held in annuities.

In re Rensin is a story involving alleged consumer fraud charges against a company called BlueHippo.  Money was scattered across three islands, and subject to a $14,000,000 FTC judgment.  The bankruptcy of Mr. Rensin is now completed, and the debt was not discharged, so litigation continues.  The below discussed Bankruptcy Court decision was not appealed by either party, and is the last word we may receive for many years on questions 2 and 3 below.

The Bankruptcy Court opinion addresses the following questions:

1. Will Florida or Belize law apply to the Trust?  If Florida law applies, then will the trust assets be considered as being accessible to the trustee in bankruptcy?  Unfortunately, the court came to the conclusion that Florida law should apply, and only cited prior cases that have come to the same conclusion, without any discussion of what the rationale for ruling this way was.  The cases cited have the same issue.
2. Will the annuities, annuity payments, and the Regions Bank account that was funded from annuity payments be protected from creditor claims under Florida Statute Section 222.14 when the trust was the “owner” of the annuities, but Mr. Rensin was the named beneficiary under the policies?

2. Does Florida Statute 222.30, which aims to prevent transfers made by a debtor into otherwise exempt assets to avoid the reach of creditors, apply to allow the transfers of the annuities to be held for Mr. Rensin?

3.  What happens to Mr. Rensin’s Florida homestead?

Practitioners in states other than Florida should evaluate the lessons of Rensin, as several important points will apply in other contexts, even if the applicable state law differs from the Florida statutes above.

Click this link to read their commentary.