Sham and Remedial Doctrines

22 Trusts & Trustees 850 (2016)

13 Pages Posted: 19 Jun 2016 Last revised: 22 Nov 2016

Date Written: June 15, 2016

Abstract

This Essay articulates a general theory of sham, understanding it as a species of fraud uniquely characterized by the deceptive misuse of an otherwise valid legal form to defeat a substantive rule of law or policy. It then considers two theoretical questions underlying the design and structure of civil remedial doctrines that protect potential victims and claimants against fraudulent sham transfers. First, should a sham avoidance doctrine require evidence of the challenged wrongdoer’s subjective fraudulent intent, or should the doctrine alternatively allow for more objective proof, such as circumstantial evidence of surrounding facts indicative of a sham transfer? Second, is a bright-line rule prohibition or a holistic standard for ex post evaluation more likely to be effective as a remedy for sham transactions and how do concerns about efficiency of judicial review weigh in this rendition of the rules-versus-standards debate? The Essay identifies the Fraudulent Transfer Doctrine as the dominant approach for addressing sham transactions in the United States, which imposes a standard rather than a rule, and allows for proof of either subjective fraudulent intent or objective circumstantial evidence of badges of fraud in connection with the challenged transaction. The Essay then surveys other specialized sham avoidance doctrines, developed to address abusive tax trusts and spousal disinheritance, which illustrate experimentation with both subjective state-of-mind criteria and rule-based prohibitions, with mixed reception and success.

Keywords: fraud, fraudulent transfer, remedies, sham, spousal disinheritance, tax, trust

Suggested Citation

Boni-Saenz, Alexander Antonio and Weisbord, Reid K., Sham and Remedial Doctrines (June 15, 2016). 22 Trusts & Trustees 850 (2016). Available at SSRN: https://ssrn.com/abstract=2796757

Alexander Antonio Boni-Saenz (Contact Author)

Chicago-Kent College of Law ( email )

565 W. Adams St.
Chicago, IL 60661-3691
United States

Reid K. Weisbord

Rutgers Law School ( email )

NJ
United States

HOME PAGE: http://law.rutgers.edu/directory/view/weisbord

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