The U.S. Bankruptcy Court for the Central District of Illinois held that a debtor's explanation of estate planning as a rationale for asset transfers made prior to bankruptcy is sufficient to survive the Bankruptcy Trustee's motion for summary judgment. However, the Court noted that a deeper factual analysis would be required and expressed skepticism for the debtor's estate planning rationale.
The debtor transferred his interest in two limited liability companies to his wife prior to filing for bankruptcy. The Bankruptcy Trustee argued that the transfers were fraudulent transfers under the Illinois Fraudulent Transfer Act, alleging that the debtor made the transfers "with actual intent to hinder, delay and defraud any creditor," and moved for summary judgment on the issue. The debtor argued that the transfers were made for estate planning purposes and, as corroborating evidence, submitted a letter from his attorney from the time of the transfers that referenced an estate planning purpose.
The Court denied the Bankruptcy Trustee's motion, holding that questions of intent are necessarily factual and cannot be decided on summary judgment. The Court noted that the analysis at trial should consider, among other things, the debtor's equity in the interests transferred versus those retained, the relationship of the recipients of the property to the transferor, the transferor's continued enjoyment of the property, the chronology of events and the financial status of the transferor at the time of the transfer. The Court also noted that an estate planning rationale will not automatically exonerate a transferor from a fraudulent transfer charge and proof that estate planning was the true motivation for the transfers will require opinion testimony from experts other than counsel for the parties.