Any practicing attorney engaged in asset protection planning is advised to read the latest decision in the Evseroff saga, U.S. v. Evseroff, No. 00-CV-06029 (E.D.N.Y., April 30, 2012). It is useful because it analyzes in some depth a variety of issues germane to the asset protection attorney. Evseroff is essentially a collection case. The U.S. Government is seeking to collect from a trust created by Jacob Evseroff some $700,000 of unpaid taxes. In finding that the assets of the trust can be seized by the Government to pay Jacob's taxes, the court addresses in considerable depth (i) fraudulent transfer law and the legal distinction between actual and constructive fraud, (ii) the concept of solvency in the context of a fraudulent transfer analysis, (iii) factors that demonstrate intent to hinder, delay or defraud creditors, (iv) burden of proof issues and (v) alter ego and nominee theories. The case is certainly instructive on what not to do.
Jacob transferred his valuable Brooklyn, N.Y. home to the trust and continued to live there. Although there was some type of rental agreement which Jacob later characterized as a license, the reality is that he transferred ownership to the trust for no consideration and continued to act as an owner, enjoy the benefits of ownership and effectively controlled all decisions related to the home. Not only was the transfer of the home to the trust found to be an actual fraud committed against Jacob's current and future creditors but the benefits he retained following transfer supported the court's finding that the trust was Jacob's alter ego and nominee.
Although the concepts of alter ego and nominee are often used interchangeably, they apply to different situations. Simply put, a nominee holds property for the benefit of another. In these situations a party has beneficial title, often characterized by access and use of the property, although legal title resides in another. The alter ego theory, which derives from the piercing of the corporate veil line of cases, involves a situation where the transferor controls the entity to which it transferred the property. These situations usually involve the dominance of the transferor over the entity with title to the property.