In re Rensin: Foreign Trust Assets Beyond the Reach of US Federal Court

In December 2018 the FTC obtained a $13.4 million judgment against Joseph Rensin in connection with the alleged defrauding of more than 50,000 retail customers. In 2001 — well before any of the suspect business — Rensin had established an offshore self-settled asset-protection trust naming himself as a discretionary beneficiary, with a testamentary power of appointment over trust assets at his death and no power to compel distributions during life.

While the FTC litigation was pending, Rensin requested and received fourteen separate distributions from the trust; some funded legal fees and creditor settlements, others funded a new business. In 2014 he changed the trust’s jurisdiction from the Cook Islands to Belize, designating a Belize trustee. In 2015 the Belize trustee used trust assets to purchase two annuities — one fixed (with payments running immediately) and one deferred variable (not yet annuitized at the time of the bankruptcy litigation).

The Bankruptcy Court, sitting in Florida, applied Florida law rather than Belize law to the analysis of the claims against the trust — Florida being a state with strong public policy against self-settled spendthrift trusts. Under Florida’s codification of the Uniform Trust Act, a creditor may reach the maximum amount distributable to the debtor-grantor; on the discretionary terms of the Rensin trust, that meant the entire corpus, in principle.

The court treated the two annuities differently. As to the fixed annuity, Florida exempts annuity payments from the reach of creditors under Fla. Stat. § 222.14. Even though the Belize trust held title, Florida law was deemed to apply, and Rensin’s creditors could not reach the payments he was receiving. The creditors invoked Fla. Stat. § 222.30 to claw back what they characterized as a conversion of non-exempt cash into exempt annuity payments; the court rejected the argument because it was the Belize trustee, not Rensin, who effected the conversion. As to the deferred variable annuity, the trust retained the surrender right — and because the Belize trustee had not been joined as a defendant, the court declined to exercise jurisdiction over that asset at all.

The creditors then sought an order compelling Rensin to direct the Belize trustee to remit assets in satisfaction of the judgment. The court refused. Citing Miller v. Kresser, 34 So.3d 172 (Fla. 4th DCA 2010), and distinguishing the seminal case of In re Lawrence, 251 B.R. 630 (S.D. Fla. 2000), the court observed that Rensin held no authority under the trust agreement to compel the trustee to act. Lawrencesat at “the outside edge of a court’s ability to order a trust beneficiary to cause property to be delivered from an otherwise fully discretionary spendthrift trust.” Rensin, having no such authority, fell well short of that edge.

The court also held that the Belize trustee was an indispensable party and that the creditors had failed to join it. Trueman Fertilizer Co. v. Allison, 81 So.2d 734 (Fla. 1955) (en banc). The court further declined to assert personal jurisdiction over the Belize trustee, finding it highly doubtful that the trustee’s contacts with the United States met the constitutional minimum.

The court left open the possibility that the creditors might attempt to join the Belize trustee in the U.S. proceedings. Belize trust law makes that exercise substantially futile. Section 7(6) of the Belize Trusts Act prohibits a Belize court from recognizing the validity of any claim against trust property based on the law or order of a foreign jurisdiction in respect of an insolvency. Section 7(7) disallows the application of fraudulent-transfer law against a Belize trust. The combined effect: properly established, independently administered Belize trust assets sit outside the practical reach of U.S. federal proceedings.