Domestic Asset Protection Trust Case Law

This page analyzes the most important court decisions on domestic asset protection trusts.

Home-State Law Overrides the Chosen Law

Where the settlor’s home state voids self-settled trusts, its courts apply their own law over the law the trust instrument chose, and the trust property is reached. Courts in Washington (In re Huber, 2013), Utah (Dahl v. Dahl, 2015), and Connecticut (Netter v. Netter, 2025) have each done so.

In re Huber, 493 B.R. 798 (Bankr. W.D. Wash. 2013). Leading case. Under Restatement (Second) of Conflict of Laws § 270, Washington law governed a trust that designated Alaska law. The trust was administered in Alaska, but its only other connections there were one trustee and a $10,000 certificate of deposit. Washington was the state of the settlor, the beneficiaries, the creditors, and the drafting attorney, and its statute has voided transfers to self-settled trusts since 1854. The transfers were void under RCW 19.36.020, and the chapter 7 trustee won partial summary judgment.

Dahl v. Dahl, 2015 UT 79, 459 P.3d 276. The Utah Supreme Court declined to enforce a Nevada choice-of-law clause in a trust holding marital property, because equitable division of marital property is a strong Utah public policy. Construed under Utah law, the trust was revocable, because the settlor had reserved an unrestricted power to amend, and his wife held an interest in the trust property as a settlor by contribution.

Netter v. Netter, 235 Conn. App. 774 (2025). Three South Dakota self-settled spendthrift trusts a husband created during the marriage with marital assets were divisible marital property under Connecticut law. The trust agreements were not valid instruments under Connecticut’s own act, which requires Connecticut governing law (§ 45a-487k(10)), because they chose South Dakota’s. Even if they qualified, § 45a-487t(a)(3) lets a court decline retroactive application that would substantially prejudice a party. The Connecticut Appellate Court reversed the judgment as to all financial orders and ordered a new trial on all financial issues.

Virginia’s statute draws the same line as Connecticut’s: a qualified self-settled spendthrift trust must expressly incorporate Virginia law to govern its validity, construction, and administration (Va. Code § 64.2-745.2).

Exclusive-Jurisdiction Clauses

A DAPT statute’s clause giving the trust state’s courts exclusive jurisdiction allocates jurisdiction within that state; it cannot keep a creditor’s suit out of another state’s courts or out of federal court, and Alaska’s and Delaware’s courts agree on the point.

Toni 1 Trust v. Wacker, 413 P.3d 1199 (Alaska 2018). Leading case. Alaska’s statute giving its courts exclusive jurisdiction over actions based on a transfer to an Alaska self-settled spendthrift trust cannot deprive another state’s courts of jurisdiction over a transitory action, and fraudulent transfer actions are transitory. A state statute also cannot contract federal jurisdiction, so Montana’s fraudulent transfer judgments against the trust and an Alaska bankruptcy court’s federal judgment both stood; the court assumed without deciding that the Toni 1 Trust was an Alaska trust at all.

IMO Daniel Kloiber Dynasty Trust, 98 A.3d 924 (Del. Ch. 2014). Denying a temporary restraining order, the Court of Chancery held that the “exclusive jurisdiction” Delaware’s statute gives it over qualified-disposition actions (12 Del. C. § 3572(a)) allocates jurisdiction among Delaware’s own courts. “Delaware has not sought through the Qualified Dispositions Act to arrogate exclusive jurisdiction for itself, nor could it.” The Alaska Supreme Court in Toni 1 expressly agreed. The trust was settled by the beneficiary’s father rather than by the beneficiary, but the holding construes the statute itself.

The Ten-Year Bankruptcy Reach-Back

Bankruptcy Code § 548(e) lets a bankruptcy trustee avoid a transfer into a self-settled trust during the ten years preceding the petition, if the debtor was a beneficiary and made it with actual intent to hinder, delay, or defraud creditors.

The section covers a “similar device” as well as a trust, and it has been applied without any choice-of-law ruling; the Code’s general fraudulent-transfer provision, § 548(a)(1), reaches back only two years. By comparison, Virginia’s statute gives a settlor’s creditor five years from the transfer to sue (Va. Code § 64.2-745.1(D)).

Battley v. Mortensen (In re Mortensen), Bankr. No. A09-00565-DMD, Adv. No. A09-90036-DMD, 2011 WL 5025249 (Bankr. D. Alaska May 26, 2011). Applying § 548(e)’s ten-year reach-back, the bankruptcy court avoided a debtor’s transfer into his Alaska self-settled trust, finding the actual intent to hinder, delay, or defraud that the section requires. In re Cyr reads the decision as determining that the trust was a self-settled trust under Alaska law.

In re Huber, 493 B.R. 798 (Bankr. W.D. Wash. 2013). Leading case. Having voided the transfers under Washington law, the court also avoided them under § 548(e), finding all five Ninth Circuit badges of fraud present. The bankruptcy trustee was denied summary judgment on alter ego, a doctrine no Washington court had applied to a trust, and on denial of discharge, requiring a trial. Reliance on counsel did not negate intent because the debtor knew their purpose, and an estate-planning motive “is not mutually exclusive of the desire to shield his assets from creditors.”

In re Erskine, 550 B.R. 362 (Bankr. W.D. Tenn. 2016). A trust its settlor called a Tennessee Asset Protection Trust met only the statute’s governing-law requirement, so his LLC’s accounts were estate property. It was revocable (“the power to revoke a trust renders it revocable”), the transferor could not be the qualified trustee, and no qualified affidavit accompanied any transfer. His four children were the named sole beneficiaries, but he kept a present beneficial interest. The LLC had been dissolved in 2012, leaving him a proprietor; the court declined to decide § 548(e) intent.

Safanda v. Castellano (In re Castellano), 514 B.R. 555 (Bankr. N.D. Ill. 2014). The court entered judgment for the bankruptcy trustee after trial. A spendthrift trust the debtor never signed but caused to be created, when she had its trustee invoke a spendthrift clause so her share passed into it rather than to her, is a self-settled trust or “similar device” under § 548(e)(1)(A). A family trustee’s unsupervised discretion left the debtor able to expect substantial control. 514 B.R. at 561–62.

Rodriguez v. Cyr (In re Cyr), 602 B.R. 315 (Bankr. W.D. Tex. 2019). Ruling on motions to dismiss, the court held that § 548(e)(1) contains no reference to non-bankruptcy law, so whether transferred assets are “self-settled” under state law does not control. The section reaches trusts and “similar devices,” meaning any device by which a debtor-beneficiary puts assets beyond creditors with actual fraudulent intent. 602 B.R. at 334–35, 340.

The claims never reached judgment. In February 2021 the court approved an $875,000 compromise, reduced to $775,000 if paid within a year (the approval order, DE 282). The agreement made the Bergerud Heritage Trust jointly and severally liable for the payment despite the debtor’s position that its spendthrift clause barred his creditors, and no party admitted liability. The debtor received his chapter 7 discharge that March, but the court approved his waiver of discharge under § 727(a)(10) for the settlement amount. By that August the estate had collected the full $775,000.

Quality Meat Products, LLC v. Porco, Inc. (In re Porco, Inc.), 447 B.R. 590 (Bankr. S.D. Ill. 2011). The first opinion to construe § 548(e)’s “self-settled trust or similar device” language, an issue of first impression, read the section as Congress’s response to state legislatures overturning the common-law rule against self-settled spendthrift trusts. It noted the House report’s count of five states with such statutes when the section passed: Alaska, Delaware, Nevada, Rhode Island, and Utah. 447 B.R. at 594–96.

Where a DAPT Statute Held

Two decisions, Klabacka v. Nelson and TrustCo Bank v. Mathews, have left a domestic asset protection trust’s property beyond a creditor’s reach, and both came from the courts of the state whose statute created the trust; neither involved a bankruptcy trustee.

Case	Court and year	Trust and forum	Result
Battley v. Mortensen	Bankr. D. Alaska 2011	Alaska trust, federal bankruptcy court	Transfer into the trust avoided under Bankruptcy Code § 548(e)
Rush University Medical Center v. Sessions	Ill. 2012	Cook Islands governing law, Illinois assets	Settlor’s retained interest held reachable; $1.5 million judgment against the trustees on his pledge
In re Huber	Bankr. W.D. Wash. 2013	Alaska trust, Washington settlor	Washington law applied; transfers void; avoided again under § 548(e)
IMO Daniel Kloiber Dynasty Trust	Del. Ch. 2014	Delaware trust (third-party settled), Delaware court	Delaware’s exclusive-jurisdiction clause allocates jurisdiction among Delaware’s courts only
Dahl v. Dahl	Utah 2015	Nevada-law trust, Utah divorce	Utah law applied; trust held revocable; assets reachable in the divorce
TrustCo Bank v. Mathews	Del. Ch. 2015	Delaware trusts, Florida settlor, New York creditor	Creditor’s principal claims time-barred; DAPT statute not reached
In re Erskine	Bankr. W.D. Tenn. 2016	Tennessee trust, Tennessee settlor	Trust failed the Tennessee statute; the LLC’s business accounts turned over
Klabacka v. Nelson	Nev. 2017	Nevada trusts, Nevada divorce	Trusts upheld; equalization order vacated; support awarded against the settlor personally
Toni 1 Trust v. Wacker	Alaska 2018	Alaska trust, Montana judgments	Alaska’s exclusive-jurisdiction clause held ineffective against Montana and federal courts
In re Cleopatra Cameron Gift Trust	S.D. 2019	South Dakota spendthrift trust (third-party settled), California support order	Full faith and credit refused to the direct-payment order; trustee not compelled to pay
Netter v. Netter	Conn. App. Ct. 2025	South Dakota trusts, Connecticut divorce	Trusts not valid under Connecticut’s act and divisible as marital property; financial orders reversed, new trial ordered

Nevada’s statute requires a Nevada trustee, a written irrevocable instrument, no mandatory distributions to the settlor, and no intent to hinder known creditors (NRS 166.015(2)(a) and 166.040(1)(b)). It carries no exception for child or spousal support unknown when the trust was created. Delaware’s act makes the opposite choice: 12 Del. C. § 3573(1) lifts its creditor restrictions for support, alimony, and divorce property division, to the extent of that debt.

Klabacka v. Nelson, 133 Nev. 164, 394 P.3d 940 (2017). Leading case. Two Nevada self-settled spendthrift trusts that met Nevada’s statutory requirements were valid, so the family court could not equalize their assets or order the trustee of the husband’s trust to pay his support obligations; the equalization was vacated. The court expressly rejected the Restatement (Third) of Trusts § 59 support exception, which the Legislature declined in 2013, and the support awards stood against the settlor personally. A nonbeneficiary spouse’s community-property share inside such a trust remains that spouse’s property, outside the spendthrift restraints.

TrustCo Bank v. Mathews, C.A. No. 8374-VCP (Del. Ch. Jan. 22, 2015). A creditor’s fraudulent-transfer claims against a Delaware trust settlor over one set of transfers were time-barred under any state’s law and dismissed with prejudice. Florida had the closest relationship and Delaware the next, both allowing four years or one from discovery, and Delaware’s borrowing statute would have applied even under New York’s longer period. The decision reaches only timing: the court assumed the transfers were fraudulent, left open whether the settlor kept impermissible control, and did not decide whether Delaware’s DAPT statute governed.

In re Cleopatra Cameron Gift Trust, 2019 S.D. 35, 931 N.W.2d 244 (S.D. 2019). Settled by the beneficiary’s father, the trust is not a domestic asset protection trust; the case shows a trust state’s court refusing to enforce an outside order against a spendthrift trust. A California order directing the trustee to pay child support straight to the obligee was enforcement, governed by forum law, rather than a judgment owed full faith and credit. South Dakota law lets a spendthrift clause bar such compelled payments, so the trustee could not be ordered to pay.

What the Settlors Who Lost Had in Common

The settlors who lost had funded their trusts with a lawsuit or a failing marriage already in view, had kept control of or benefit from the property, or had signed instruments that failed the statute they invoked.

Timing. The Tangwall family moved real property into the Toni 1 Trust in 2010, after Montana courts had begun entering default judgments against them. Netter created his trusts in 2013 and 2015, “as the marriage deteriorated” in the trial court’s words. Huber established his trust in September 2008 with litigation already threatened.

Retained control and benefit. Huber received $14,500 a month in trust income and kept living in his residence, held through an Alaska LLC and leased back to him. Sessions held a protector’s absolute power to appoint or remove trustees and to veto any of their discretionary actions.

Formation defects. Erskine and Dahl turned on the instruments themselves, before any court reached intent: Erskine’s trust was revocable, named him trustee, and had no qualified affidavit behind it, and Dahl’s reserved an unrestricted power to amend.

The Common-Law Rule Behind the Statutes

Before any state enacted a DAPT statute, the common law voided a self-settled spendthrift trust as to the settlor’s creditors, and the Illinois Supreme Court has held that the state’s fraudulent transfer act did not abrogate that rule.

Rush University Medical Center v. Sessions, 2012 IL 112906, 980 N.E.2d 45 (Ill. 2012). Leading case. The common-law rule voiding self-settled spendthrift trusts survived the Illinois Fraudulent Transfer Act, and the settlor’s reachable interest extends to everything the trustees could have distributed to him, even assets undistributed at death. The $1.5 million judgment against the trustees on his pledge was affirmed. The trust held a 99 percent limited partnership interest (over $16.2 million) and Illinois real estate ($2.7 million) and named Cook Islands law; the opinion records the clause and does not analyze it.

Menotte v. Brown (In re Brown), 303 F.3d 1261 (11th Cir. 2002). Under Florida law, a self-settled trust’s spendthrift clause is ineffective against the settlor’s creditors, even without fraud or insolvency at creation. Creditors reach the interest the settlor retained, a 7 percent lifetime unitrust income, but not the corpus irrevocably vested in charitable remaindermen. Self-settlement and settlor control are independent grounds for invalidating a spendthrift clause.

Whether a domestic asset protection trust protects a non-DAPT-state resident, and how it compares with an offshore trust and with a Cook Islands trust, are planning questions answered on the domestic asset protection trust page and the best states ranking. The offshore trust decisions are collected on the offshore trust case-law page.