Stasz v. Gonzalez (In re Stasz), BAP No. CC-10-1145-PaDKi, Bk. No. LA 05-43980 AA. (BAP 9th Cir., April 5, 2011).
In Stasz, the debtor created two trusts, then reportedly rescinded both trusts. When she filed for Chapter 7 bankruptcy, she listed the trust on her schedule, valued at $0. Four years later, while still administering the estate, the bankruptcy trustee became aware of a bank account in the name of one of the trusts, with more than $220,000 in the account. The bank, once notified, sent a check for this amount to the trustee, thinking the money was estate property. Stasz, on the other hand, argued that the property was not property of the estate, and that it be returned to the bank account.
The bankruptcy court, as a result, did not decide whether or not the money was property of the estate, but ordered it returned to the bank. At a subsequent hearing, the court ordered the property part of the estate and that it be turned over to the bankruptcy trustee.
On appeal, the bankruptcy court held that the property was indeed property of the estate if the trust was either a sham or had been rescinded before the debtor's bankruptcy petition was filed. The court reasoned that the trust was a sham because it did not legally comply with a trusts' requirements, because the person who created the trust to benefit Stasz did not intend to do so, and was not aware of the consequences of signing the documents he signed. Without intent of the settlor, there is no trust. Additionally, there had been no trustee to the trust for years, and the funds in the trust all originated from the debtor. Further, there was evidence on record that the debtor had rescinded the trusts at issue, making the bank account a sham trust.
As a result, the court determined that the assets in the so called "trust" were actually property of the estate, and could be paid to the debtor's creditors during the bankruptcy proceeding.
