DAPT Timing Matters Toni 1 Trust v. Wacker (Alaska)
Domestic Asset Protection Trusts (DAPTs) are often discussed as sophisticated tools for shielding assets from future creditor claims.
When designed correctly—and, critically, implemented before legal trouble arises—DAPTs can play a legitimate role in long-term wealth and risk planning. But courts have been equally clear that DAPTs are not retroactive shields and do not override fraudulent transfer law.
The Alaska Supreme Court’s decision in Toni 1 Trust v. Wacker is a clear and instructive example of where a DAPT failed to protect assets, not because the trust statute was invalid, but because the planning collided with creditor-rights principles and jurisdictional limits.
Background: Judgments First, Trust Funding Second
The case arose after courts in Montana entered a series of judgments in 2011 and 2012 against Donald Tangwall and members of his family. Only after those judgments were entered, two parcels of real property transferred into a trust known as the Toni 1 Trust.
As the Alaska Supreme Court summarized the sequence of events:
“After a Montana state court issued a series of judgments against Donald Tangwall and his family, the family members transferred two pieces of property to the ‘Toni 1 Trust’[…]”
The trust was described as “a trust allegedly created under Alaska law,” placing it squarely within Alaska’s statutory framework for self-settled asset protection trusts.
Creditors did not challenge the trust in the abstract. Instead, they challenged the transfers themselves, arguing that the conveyances were made to avoid satisfaction of the Montana judgments. Both a Montana state court and a federal bankruptcy court agreed, concluding that:
“[…] the transfers were made to avoid the judgments and were therefore fraudulent.”
Those rulings became the foundation for the later Alaska litigation.
The Trustee’s Alaska Strategy
Rather than attacking the fraudulent transfer findings on their merits, the trustee pursued a jurisdictional strategy. Relying on Alaska Statute § 34.40.110(k), the trustee argued that only Alaska courts had subject-matter jurisdiction to decide whether transfers into an Alaska DAPT were fraudulent.
As the Alaska Supreme Court framed the argument:
“Tangwall, the trustee of the Trust, then filed this suit, arguing that Alaska state courts have exclusive jurisdiction over such fraudulent transfer actions under AS 34.40.110(k).”
If accepted, this position would have rendered the Montana and federal bankruptcy court decisions void for lack of jurisdiction—effectively using Alaska’s DAPT statute as a jurisdictional shield.
Why the Alaska Supreme Court Rejected That Argument
The Alaska Supreme Court rejected the trustee’s position decisively, grounding its analysis in long-standing principles of interstate and federal jurisdiction.
First, the Court made clear that a state legislature cannot unilaterally strip other courts of jurisdiction:
“This statute cannot unilaterally deprive other state and federal courts of jurisdiction.”
The Court emphasized that jurisdiction is determined by the law of the forum hearing the case, not by another state’s attempt to reserve disputes for itself:
“Jurisdiction is to be determined by the law of the court’s creation, and cannot be defeated by the extraterritorial operation of a statute of another state.”
This point is especially important in the DAPT context. Fraudulent transfer claims are considered transitory actions, meaning they may be brought wherever a court has personal jurisdiction over the parties. Alaska could not convert those claims into Alaska-only proceedings by statute.
Federal Bankruptcy Jurisdiction Cannot Be Curtailed
The Alaska Supreme Court also addressed the limits of state power vis-à-vis federal courts. Because the fraudulent transfer findings were also made in a federal bankruptcy proceeding, the trustee’s argument necessarily required Alaska law to override federal jurisdiction.
The Court rejected that premise outright, explaining that states have:
“[…] no power to enlarge or contract the federal jurisdiction.”
Federal bankruptcy courts derive their authority from federal law, including express statutory powers to avoid fraudulent transfers. State DAPT statutes cannot negate or restrict those powers.
The Result: No Jurisdictional Shield, No Asset Protection
Having rejected the trustee’s jurisdictional arguments, the Alaska Supreme Court affirmed dismissal of the Alaska action in full:
“We therefore affirm the superior court’s judgment dismissing Tangwall’s complaint.”
The practical consequence was straightforward: the Toni 1 Trust did not succeed in insulating the transferred assets from creditor claims, and the prior fraudulent transfer rulings remained effective.
What Toni 1 Trust v. Wacker Does—and Does Not—Stand For
This case is sometimes mischaracterized as a rejection of DAPTs generally. That is not what the Alaska Supreme Court held.
Instead, the decision reinforces several well-established principles:
- DAPTs do not override fraudulent transfer law.
If assets are transferred after judgments are entered—or when creditor claims are reasonably foreseeable—those transfers remain vulnerable. - Timing matters as much as structure.
Asset protection planning must be done before legal trouble arises, not in response to it. - Jurisdictional provisions have limits.
No state can force other states or federal courts to surrender jurisdiction over creditor-rights claims. - DAPTs are planning tools, not emergency measures.
Courts will distinguish between legitimate long-term planning and efforts to place assets beyond reach after liability has attached.
How This Case Fits into Broader Asset Protection Planning
When viewed alongside cases like In the Matter of the CES 2007 Trust, Toni 1 Trust v. Wacker provides an important counterbalance.
One shows how asset protection structures can be respected when properly implemented; the other shows what happens when planning is attempted too late.
For clients—U.S. and non-U.S. alike—the lesson is consistent: effective asset protection requires early planning, careful jurisdictional analysis, and compliance with fraudulent transfer law.
Conclusion
Toni 1 Trust v. Wacker underscores a simple but critical truth: a Domestic Asset Protection Trust is not a cure for existing legal problems. Courts will look beyond statutory labels to timing, intent, and substance.
For those considering DAPT planning, the decision serves as a cautionary example—and a reminder that thoughtful, proactive planning is essential.
Contact Us
At Dilendorf Law Firm, we assist U.S. and international clients with sophisticated cross-border estate and asset protection planning. Our practice spans domestic asset protection trusts (DAPTs) in leading U.S. jurisdictions—such as Wyoming, Alaska, Nevada, and South Dakota—as well as offshore trust structures in key jurisdictions including the Cook Islands, Nevis, and the Cayman Islands.
In each jurisdiction, we have developed a network of experienced trustees, financial institutions, and vetted legal partners who help ensure that every structure is professionally administered and compliant with local regulatory standards.
To discuss how our experience and network can support your planning goals, contact us at info@dilendorf.com or by calling us at 212.457.9797 to discuss your needs.
