CES 2007 Trust Case Analysis

In In the Matter of the CES 2007 Trust, C.A. No. 2023-0925-SEM (Del. Ch. 2025), a Delaware court dismissed a judgment creditor’s petition to void a Delaware asset protection trust. The creditor had no injury connected to the trust and no standing. The October 1, 2025 order followed a Senior Magistrate’s final report of May 2, 2025, which found the trust met every requirement of Delaware’s statute.

Both rulings are trial-level Court of Chancery decisions. No Delaware Supreme Court decision in the case exists as of September 2026. The Vice Chancellor wrote that the magistrate’s analysis appeared correct but was advisory, so the finding that the trust qualified under the statute binds no one.

How the Michigan Judgment Reached Delaware

Can IV Packard Square, LLC lent money in 2014 to a company Craig Schubiner owned, to finance a luxury retail and residential project in Ann Arbor, Michigan. The project failed, and in 2018 the lender sued Schubiner in the Oakland County Circuit Court on the guaranty he had signed for the loan. In December 2019 that court entered a judgment of nearly $14 million against him, plus fees, interest, and costs.

On January 16, 2020 the Michigan court barred Schubiner from transferring assets, other than ordinary business dealings, until the judgment was paid. The order also barred anyone who knew of it from accepting property from him. Schubiner has maintained since then that he has no personal assets to pay the judgment. The lender has pursued him and entities he owns or controls in Michigan, Colorado, and elsewhere.

The Delaware petition, filed September 11, 2023 and amended a month later, asked the Court of Chancery to declare the trust’s spendthrift clause void or to invalidate the trust altogether, so that the trust’s assets could satisfy the judgment. The lender called the trust a sham and a shell built to keep Schubiner from paying. It named as interested parties the trustee, three members of the Schubiner family, and a minor beneficiary.

The trust’s grantor and beneficiaries moved to dismiss in April 2024. The trustee, First State Trust Company, answered that the trust was no sham and joined the motion in part, agreeing that the claims were untimely and that no facts showed the trust failed the statute. The magistrate heard argument on December 5, 2024.

What the Trust Held and Who Controlled It

Schubiner created the CES 2007 Trust by an agreement dated April 30, 2007, before the lender’s 2014 loan. U.S. Trust Company of Delaware was the first trustee. Schubiner kept the role of Advisor, which carried full power to manage the trust’s investments as a fiduciary. His brother became Trust Protector, able to remove the trustee and appoint a successor. Schubiner barred himself from ever serving as trustee, and the agreement gave the trustee sole and absolute discretion over every distribution.

The beneficiaries are Schubiner’s wife, if he has one, his parents, and his descendants. He is unmarried, with one minor daughter and one living parent, and he has two brothers. The spendthrift clause bars any beneficiary from assigning or pledging an interest, says no trust estate is liable for a beneficiary’s debts, and declares itself a transfer restriction enforceable under section 541(c)(2) of the Bankruptcy Code.

The trust holds 90 percent of three Delaware limited liability companies, 304, 305, and 306 Associates LLC, and Schubiner manages all three. Of the three, 305 Associates owns a house at 200 Aspen Road in Birmingham, Michigan, and the vacant lot next door at 201 Linden Road. Schubiner used or claimed the house as his primary residence from 2001 to 2018. Another, 306 Associates, owns rental property on East Hyman Avenue in Aspen, Colorado. The pleadings said nothing about what 304 Associates owns.

The first trustee served for a decade. In May 2017 it asked the Court of Chancery to let it resign, appoint a successor, and order payment of its overdue fees, alleging that Schubiner and his brother had ignored its requests. A successor was found, and the petition was withdrawn that August. First State Trust Company served from July 2017, and by the time of the October 2025 order it too had resigned; Schubiner told the court a new trustee had been appointed.

The Real Estate Transfers at the LLC Level

The lender’s sham theory rested on how the three properties had moved between Schubiner and the companies. Schubiner bought the Birmingham house in 1999 for $450,000 and borrowed roughly $1.3 million to build on it.

In 2004 he quitclaimed it to a bonding agency as collateral in a lawsuit. In 2006 he deeded it to 305 Associates and back to himself the same day, one dollar each way. In March 2007 he deeded it to 305 Associates again. In early 2020 he took it back into his own name, pledged it for a personal debt, and returned it to the company a few days later.

He and 305 Associates bought the Linden lot together in 2009. In January 2020 he conveyed his interest to the company for one dollar, on the same deed that moved the house. The Colorado property was never his personally. A company he owned outright deeded it to 306 Associates in April 2007 for ten dollars. In 2016 he moved it into his own name to refinance a lien, then moved it back. Litigation over that 2016 transfer was pending in Pitkin County, Colorado.

The magistrate declined to treat any of this as a transfer to or from the trust. Under Delaware’s LLC Act a membership interest is personal property, and a member has no interest in specific company property. The trust, through its 90 percent interests, therefore had no interest in the real estate the companies owned. No transfer to or from the trust existed to examine for fraud. The lender had pleaded no basis for piercing the companies, which the report called a difficult task in a Delaware court.

What the Qualified Dispositions Act Requires

Delaware has allowed self-settled asset protection trusts since 1997 under the Qualified Dispositions in Trust Act, 12 Del. C. §§ 3570–3576. A transfer is protected only if it is a qualified disposition to a qualified trustee. A qualified trustee is a Delaware resident other than the settlor, or an institution that Delaware authorizes to act as trustee and that the Bank Commissioner, the FDIC, or the Comptroller of the Currency supervises. The trust instrument must invoke Delaware law, contain a spendthrift clause, and be irrevocable.

A creditor whose claim arose before the transfer may sue only under Delaware’s fraudulent transfer statute. That suit must come within four years of the transfer or, if later, within one year after the creditor discovered or could have discovered it, when actual fraud is claimed. A creditor whose claim arose later must prove the transfer was made with actual intent to defraud that creditor, within four years of the transfer. The creditor’s burden is clear and convincing evidence.

The lender argued the trust never had a qualified trustee because the trustees did nothing and Schubiner ran it in fact. The magistrate found both trustees met the statute’s definition. The petition alleged nothing showing either had failed to keep custody of trust property in Delaware, maintain the trust’s records, prepare its fiduciary tax returns, or otherwise materially participate in its administration. A trust holding nothing but membership interests needs little administering, the report said, and dormancy is not disqualification. The first trustee’s 2017 complaints had been resolved and followed by a successor’s appointment.

Schubiner’s retained powers did not undo the trust either. The Act lets a settlor appoint advisers and protectors who may remove and replace the trustee and direct or veto distributions, and the report read his investment-advisor role, exercised under fiduciary duties, as within that allowance.

The Act says nothing about a settlor who keeps running a business the trust owns. The magistrate found the Act did not need to say so, because the trust owned only membership interests, and the trustee could invoke a member’s rights under the LLC Act. The petition was scant, in the report’s word, on how Schubiner actually dealt with the trust.

The agreement passed on every count. Article Eighth makes Delaware law govern and sends any dispute to a Delaware court. Article Second contains the spendthrift clause the statute prescribes. Article Ninth declares the trust irrevocable, allowing only an independent trustee to amend terms in ways that alter no beneficial interest. The moving parties had also argued the petition was untimely, and the magistrate never reached that question, because the qualified-disposition findings disposed of the case.

The Common-Law Sham Argument Under Kulp v. Timmons

Delaware’s spendthrift statute, 12 Del. C. § 3536(a), gives a beneficiary’s creditor only the rights the trust instrument or Delaware law grants. The lender read the phrase “the laws of this State” as preserving the common-law power to void a sham trust, and the magistrate agreed such a route exists.

In Kulp v. Timmons, 944 A.2d 1023 (Del. Ch. 2002), then-Vice Chancellor Jacobs held that the statute did not displace the common law. Under that law a court gives no effect to a spendthrift trust that has no economic reality and only lets the settlor control and enjoy the property as he did before.

Two doctrines underlie that rule. Public policy will not let a person create a spendthrift trust solely for his own benefit. A trustee who controls the assets for himself, owing fiduciary duties to no one else, defeats a spendthrift trust’s purpose, which is to protect a beneficiary from his own improvidence. The merger doctrine voids a trust where the settlor’s interests and the beneficiaries’ interests are identical.

Neither applied, because the trust’s assets were membership interests that a qualified trustee held for all the beneficiaries. The magistrate declined to pierce down through the companies, treat them as Schubiner’s alter egos, and convert the trust’s membership interests into real estate. The report recommended dismissal at the pleading stage and reached nothing else. The unreached arguments included whether the lender had pleaded fraud in the real estate transfers and whether positions it took in other courts estopped it.

The Standing Ruling on Exceptions

The lender took exceptions to the report, and Vice Chancellor Laster reviewed it de novo. He affirmed the dismissal, but on a ground the report had not addressed. A court must consider on its own whether it has jurisdiction, and standing is jurisdictional in Delaware. Delaware courts apply the standing requirement to avoid issuing advisory opinions for “mere intermeddlers.” A party needs an injury in fact from the conduct it challenges, concrete and particularized, actual or imminent.

The lender had no injury of any kind connected to the trust. It had lent money to one of Schubiner’s entities, never to the trust. Schubiner and the companies had moved properties back and forth, but those transfers did not affect the trust, and the trust’s assets never changed. Nothing connected the lender to the problems it claimed to see in the trust’s administration.

The lender seemed to concede the point. Its stated reason for the suit was that the trustee should learn facts bearing on whether it had a duty to exercise its rights as the companies’ majority owner. Where the trust was concerned, the Vice Chancellor wrote, the lender was “a classic intermeddler.”

The report’s analysis “appears correct,” the order said, but with no standing there was no basis to reach the merits, and the report’s conclusions were “technically advisory opinions.” The case was dismissed for lack of jurisdiction on October 1, 2025. The order also recorded new facts. First State had resigned, the lender argued the trust therefore lacked a qualified trustee and had to dissolve, and Schubiner said a new trustee had been appointed. None of that was decided.

What Happened to the Same Transfers in Michigan

The lender fared better in the court that entered its judgment. In Schubiner v. Can IV Packard Square, LLC, Nos. 371134 and 377133 (Mich. Ct. App. July 17, 2026), the Michigan Court of Appeals affirmed an Oakland County order of March 14, 2025. That order found Schubiner’s January 20, 2020 deed returning the Birmingham house and the Linden lot to 305 Associates a fraudulent transfer under Michigan’s Uniform Voidable Transactions Act, and voided the deed.

Schubiner had taken both parcels into his own name on January 16, 2020 to refinance them, because his lenders would not lend to the company. He borrowed $1.5 million personally to pay off the existing loans and deeded the parcels back on January 20.

The trial court found him insolvent at the time, counting the $14 million judgment as a debt. It also found he received no reasonably equivalent value, because the refinancing shifted $1.5 million of debt from the company to him. The appeals court also affirmed the rejection of his separate claim for relief from the judgment itself.

The Michigan decision says nothing about the Delaware trust beyond noting that 305 Associates was owned by family trusts. It reaches property the company held, through a deed the company’s manager signed while under a judgment, which is the level the Delaware court refused to examine.

What CES 2007 Trust Means for a Delaware DAPT

A Delaware asset protection trust settled in 2007 held against a creditor who attacked it in 2023. The reasons are narrower than the result. The creditor sued in Delaware without pleading the one claim the statute allows, a fraudulent transfer action against the transfers into the trust. A creditor whose claim arose after the transfer must bring that action within four years and prove actual intent by clear and convincing evidence.

The lender never explained how anything done through the trust had injured it, and a court will not police a trust’s statutory compliance for a stranger to the trust. The trust’s only assets were membership interests in companies, so the real estate transfers the creditor could point to ran between the settlor and the companies and never touched the trust.

The case comes with two limits. The magistrate’s findings on the statute are advisory, because the Vice Chancellor dismissed for lack of standing and reached nothing else, so no Delaware court has yet held in a binding decision that a qualified disposition defeats a creditor. And the same LLC layer that kept the trust out of reach in Delaware left the companies’ real estate exposed in Michigan, where the judgment court voided the manager’s own deed.

Among the court decisions testing domestic asset protection trusts, CES 2007 Trust joins Klabacka v. Nelson and TrustCo Bank v. Mathews as the third case to leave a trust’s property beyond a creditor’s reach. Like those two, it was decided in the trust state’s own courts, with no bankruptcy trustee involved.

Schubiner’s creditor filed in Delaware, which is the exception. A domestic asset protection trust reliably protects only a settlor who lives in the state whose statute created the trust, because the creditor picks the forum. In In re Huber a bankruptcy court disregarded an Alaska governing-law clause, applied the settlor’s home Washington law, and unwound the transfers.

The Bankruptcy Code’s self-settled trust rule reaches transfers made in the ten years before a petition. It applies only where the settlor funded the trust intending to hinder, delay, or defraud a creditor, which the trustee must prove. By the time this lender had its judgment in December 2019, the 2007 transfers sat outside that ten-year window. No bankruptcy case was before either court.

An offshore trust takes the forum question out of play, because the trustee sits in a foreign court’s jurisdiction and no U.S. order reaches the assets. That protection carries a cost Schubiner never faced, because a settlor who keeps control of an offshore trust can be held in contempt.

Delaware’s Court of Chancery turned this judgment creditor away at the pleading stage. That outcome is available to a settlor who lives in a state with its own self-settled trust statute and who cannot justify offshore planning. A settlor who moves property in and out of the companies while under a judgment, as Schubiner did, hands the creditor a different target.