¶ 2301
Overview
The claim this chapter examines. The claim most often brought against the property of an asset protection trust is a fraudulent-transfer claim. A creditor of the settlor, unpaid, asserts that the settlor's transfer of property to the trustee was made to hinder, delay or defraud creditors, or was made for no value when the settlor could not pay his debts, and asks a court to treat the property as still available to satisfy the settlor's debt. In the United States the claim is brought under the Uniform Voidable Transactions Act or its predecessors, under the avoidance powers of the Bankruptcy Code, or under the common law descended from the Statute of Elizabeth. In England it is brought under section 423 of the Insolvency Act 1986. In Belize, outside the Trusts Act, it would be brought under section 149 of the Law of Property Act. This chapter asks what becomes of such a claim when the property is held by the trustee of a trust created under the law of Belize.
The answer in one paragraph. Section 7(6) of the Trusts Act directs the court not to vary or set aside a Belize trust, and not to recognise the validity of any claim against the trust property, pursuant to the law of another jurisdiction or the order of a court of another jurisdiction, in respect of "the claims of creditors in an insolvency." Trusts Act, Cap. 202, s. 7(6)(c). Insolvency is a financial condition. A debtor who cannot pay, or does not pay, his debts as they fall due is insolvent, whatever his balance sheet shows and whether or not any proceeding has been brought against him. A fraudulent-transfer claim exists only because a debtor has not paid a creditor, and the creditor seeks the transferred property because the debtor's own assets have not satisfied the debt. Every such claim is therefore a claim of a creditor in an insolvency. Section 7(6)(c) forbids the Belize court to recognise it under foreign law or a foreign order, and section 7(7) provides that the bar operates notwithstanding section 149 of the Law of Property Act, the Belize remedy of the individual defrauded creditor. The protection reaches the ordinary judgment creditor acting alone as fully as it reaches a trustee in bankruptcy.
Why a separate chapter. Chapter 11 sets out section 7 in full, analyses each of its subsections and states the reading of paragraph (c) that this treatise adopts, with the textual grounds for it (see supra ¶¶ 1150.01–1150.12, 1160.01–1160.09). This chapter does three further things. It examines the fraudulent-transfer claim itself, so that the reader can see why the claim is, in every form it takes, a claim that rests on non-payment. It examines the concept of insolvency in the law from which Belize law descends, and in the law of the jurisdictions whose creditors most often come to Belize, to show that the reading of paragraph (c) adopted here is the ordinary legal meaning of the word and is used in that sense by Belize's own legislature. And it applies the reading to the creditors who appear in practice: the judgment creditor of a solvent-looking settlor, the creditor whose claim arose after the trust was funded, the trustee in bankruptcy, the receiver, the regulator and the tax authority.
The contrary view. A body of commentary, most of it published by practitioners who promote trusts in competing jurisdictions, reads "insolvency" in paragraph (c) as meaning bankruptcy, or a collective proceeding of some kind, and concludes that a Belize trust is protected against a trustee in bankruptcy and exposed to the ordinary judgment creditor. The commentary seldom engages with the words of the Act, the definition in section 67, the override in section 7(7) or the meaning the word bears in the law of insolvency itself. Chapter 11 answers the main arguments that can be made for it (see supra ¶ 1150.10). This chapter answers the remaining ones (see infra ¶ 2390.08), and explains why the reading is mistaken as a matter of insolvency law as well as of statutory construction.
What the chapter does not decide. Section 7(6)(c) governs what the Belize court may recognise. It does not govern what a foreign court may do to the settlor, who is within that court's jurisdiction, nor what a foreign court may do to trust property located within its reach. A settlor who funds a Belize trust when he is already unable to pay his creditors may find that the trust holds in Belize while he is held in contempt at home (see supra ¶¶ 1170.09–1170.10; see infra ch. 26). For that reason the questions that matter in the foreign court, the settlor's solvency at the date of each transfer, the existence and foreseeability of claims, and the settlor's retained control, remain central to planning, even though they do not decide the result in Belize. The final section of the chapter turns to them (see infra ¶ 2390).
Plan of the chapter. Paragraph 2310 examines the anatomy of the fraudulent-transfer claim in its English, American and Belize forms. Paragraph 2320 examines the concept of insolvency in common-law systems, including the decision of the Supreme Court of the United Kingdom in BNY Corporate Trustee Services Ltd. v. Eurosail-UK 2007-3BL PLC. Paragraph 2330 places the words of section 7(6)(c) in the setting of the Trusts Act and of the later Belize statutes that use the same word. Paragraph 2340 considers the design and purpose of the Act. Paragraph 2350 addresses the debtor who is rich but does not pay, and the time at which insolvency is tested. Paragraph 2360 considers existing and future creditors. Paragraph 2370 takes the claimants one by one. Paragraph 2380 identifies what paragraph (c) does not bar. Paragraph 2390 turns to solvency evidence, pleading and planning, and answers further arguments made for the contrary view.
Sources. The Trusts Act is cited from the Revised Edition 2020 as amended by the Trusts (Amendment) Act 2023, the Insolvency and Bankruptcy Act 2025 from the enacted text, No. 13 of 2025, and the Limited Liability Companies Act and the International Foundations Act from their 2020 revised editions as amended in 2023. The Uniform Voidable Transactions Act is cited from the 2014 text with official comments, the Bankruptcy Code from the United States Code, and the Insolvency Act 1986 from the revised text on the official United Kingdom legislation service. No reported Belize decision has construed section 7(6)(c) (see supra ¶ 1180.06).