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

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

An attorney-in-fact owes fiduciary duties to his or her principal when acting pursuant to a power of attorney.  When an attorney-in-fact acts contrary to his or her principal’s instructions, then they may end up breaching their fiduciary duties.  In Georgia, the same may hold true for successor attorneys-in-fact under a power of attorney because that’s what happened to Se Ill Choi in Lee v. Choi.

John Blackwell executed a power of attorney naming his wife, Ki Tae Lee, as attorney-in-fact, and naming Choi as her successor in the event the wife was unable to serve.  It was a typically broad power of attorney, providing for bank, business, real property, personal property, tax and insurance transactions, borrowing money, the commencement and prosecution of disputes, and granting access to safe deposit boxes.

The Blackwells also agreed to open a joint investment account naming

This morning, in a landmark ruling for gay rights, the Supreme Court of the United States struck down the Defense of Marriage Act (DOMA), on Fifth Amendment Equal Protection grounds, in the case of U.S. v. Windsor (570 U.S. ______ (2013)). DOMA is the 1996 federal statute preventing federal recognition of same-sex marriages.

Under DOMA, marriage is defined for federal purposes as a union between one man and one woman. Such definition determined who was covered by more than 1,100 federal laws, programs and benefits, including Social Security survivor benefits, immigration rights and family leave, as well as federal tax benefits, including, as was the issue in Windsor, the unlimited federal estate tax marital deduction. Under the law, gay couples who are legally married in a state (or foreign country) that

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

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

We know that, because in terrorem clauses result in forfeitures, they are to be narrowly construed.  Just how narrow the construction can mean the difference between a significant inheritance or no inheritance at all.  When a testator indicates that a taker under the will forfeits the “entire interest” that the taker would otherwise have under the will, is there room to more narrowly construe the phrase “entire interest” to mean anything other than the taker’s entire interest?  In other words, can you distinguish between a right to specific bequests and a right to take as part of a residual class?  According to the Georgia Supreme Court, “no.”

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

Many states base trust income taxation on the domicile or residence of the settlor at the time the trust became irrevocable. Some of these states have taken the position either by statute or case law that the residence or domicile of the settlor provides sufficient contacts with the state for the state to impose its income tax burden on the trust. However, the Court in New Jersey recently expressly rejected that view and held in Residuary Trust A u/w/o Fred E. Kassner v. Director, Division of Taxation, 2013 N.J. Tax LEXIS 1 (January 3, 2013), that constitutional due process requires additional minimum contacts to subject a trust to state income taxation.

Residuary Trust A u/w/o Fred E. Kassner (“Trust”) was created under the will of a New Jersey domiciliary. However after Kassner’s death, the sole Trustee of the Trust was a resident of New York. The Trust owned S corporation

The 7520 rate for July 2013 is set to increase to 1.40%.

The Federal Interest Rates for July can be found here.