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Playground Rules Apply: No Take Backs Even With Spendthrift Provision

82980840In the case, In re Indenture of Trust dated January 13, 1964, the Settlor’s grandson Milton learned that, just like on the playground, there are no take backs, even when the trust for his benefit contained a spendthrift provision that prohibited voluntary and involuntary transfer of his interest. As the blog, Dumb Little Man Tips for Life, describes the rule, “Once you give something, you can’t ask for it back. Whether it’s a physical gift, a gift of money, or a gift of time, asking for a takeback is pointless. It shows bad faith and makes you untrustworthy.”

While it may seem counter-intuitive to the purpose of a spendthrift provision, in certain circumstances, it may be desirable for a beneficiary of a spendthrift trust to make an assignment of his or

Washington Court Finds Alaska Self-Settled Asset Protection Trust Subject to Washington Uniform Fraudulent Transfer Act

The Bankruptcy Court for the Western District of Washington has now joined other states in invalidating transfers to a self-settled trust on a variety of grounds in the latest asset protection self settled trust case, In re Huber, 2012 Bankr. LEXIS 2038 (May 17, 2013). The Trustee in this case successfully obtained a summary judgment invalidating Donald Huber’s transfers to the Donald Huber Family Trust made shortly before he filed bankruptcy, on the grounds that: (1) the Trust was invalid under applicable state law, (2) Huber’s transfers were fraudulent under § 548 (e)(1) of the Bankruptcy Code, and (3) Huber’s transfers were fraudulent transfers under the Washington State Fraudulent Transfers Act.

Donald Huber was a real estate developer who had been involved with real estate development in the State of Washington for over 40 years. He resided in Washington, his principal place of business was Washington, and almost all of

Spendthrift Trust Was an Attempt to Delay Payment to Creditors Under Oklahoma Uniform Fraudulent Transfer Act

What is the extent of the settlor’s intent required to find that a transfer to an irrevocable asset protection trust is a transfer in fraud of creditors? If the trustee has been directed to pay the settlor’s current creditors, is that sufficient to negate a finding that the transfer to the trust was a fraudulent transfer? That was what the Court was called on to decide in United States v. Spencer, 2012 U.S. Dist. LEXIS 142195 (October 2, 2012).

In this case, Anthony Spencer (“Spencer”) pleaded guilty to 37 criminal tax offenses and was sentenced to 63 months in the Federal penitentiary. Just before Spencer’s report date, the IRS sent him the “Tax Examination Changes” showing tax due of just under $500,000. Shortly thereafter and just before he began serving his sentence, Spencer received a $600,000 divorce settlement payment from his former wife, which he placed in an account titled

Illinois Supreme Court Finds Cook Islands Spendthrift Trust Void as to Creditors Under Common Law

In a case of first impression, the Illinois Supreme Court has ruled in Rush University Medical Center v. Sessions, 2012 WL 4127261 (Ill., Sept. 20, 2012), that a self settled spendthrift trust is void as to the settlor’s creditors, so that Rush University Medical Center (“Rush”) was entitled to recover the unfulfilled pledge made by the settlor from the trust assets after the death of the settlor. The question of the relationship between a state’s law regarding self settled spendthrift trusts and its Fraudulent Transfers Act is again examined by this Court, but with a different twist than with the Kilker court.

Here, Robert Sessions (“Sessions”), created the Sessions Family Trust (“Trust”) in the Cook Islands in 1994, and transferred to the trust, among other property, certain real property located in Illinois, which at the time of his death had a value of about $2.7 Million. The Trust authorized distributions

District of Columbia Court Finds No Fraudulent Transfer to Revocable Trust Under Uniform Fraudulent Transfer Act

Is the transfer of assets to a revocable trust by a terminally-ill settlor a fraudulent transfer or a constructively fraudulent transfer under the District of Columbia Uniform Fraudulent Transfer Act (DC-UFTA)? Can a bank that is a decedent’s creditor enjoin the decedent’s widow or other trust beneficiary from selling assets she received from the decedent? Can a decedent’s creditor collect a decedent’s debt from the decedent’s widow and beneficiary of the decedent’s revocable trust? These are among the issues the Federal District Court in the District of Columbia decided in TD Bank, N.A. v. Pearl, 891 F. Supp. 2d 103 (D.D.C., Sept 19, 2012). What is amazing is that this case was filed, given the outcome and the somewhat humorous dress-down the Court gave the bank.

In September of 2010, Mr. Pearl’s company borrowed $17.5 Million in an unsecured loan from TD Bank, N.A. (“Bank”), and Mr. Pearl guaranteed the

California Court Finds Fraudulent Transfer Under Uniform Fraudulent Transfer Act–Calls Into Question Usefulness of Domestic Asset Protection Trusts

The California Court of Appeals in Kilker v. Stillman, 2012 WL 5902348 (Cal. App. 4 Dist., Unpublished), Nov. 26, 2012, found that a fraudulent transfer had occurred when a California resident created an asset protection trust in Nevada, even though the trust was created several years prior to the litigation giving rise to the judgment creditor.

Here, the defendant, Frank Stillman (“Stillman”), a soil engineer, created the Walla Walla Group Trust in 2004 and funded the Trust with virtually all of his assets, for “asset protection” at a time when he had no known current creditors, “because soil engineers are frequently sued.” The initial trustee of the trust was the Nevada accountant who helped Stillman set up the trust, but Stillman had removed the initial trustee and replaced him with a trusted employee. Even though Stillman was not the Trustee, he managed all of the trust assets, which he used

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