When a Nevada DAPT Fails: United States v. Huckaby
The decision in United States v. Huckaby provides a precise illustration of how courts analyze creditor rights against trust-held real property—particularly where a Domestic Asset Protection Trust is used to hold assets located in another state.
Despite the trust being labeled as a Nevada spendthrift trust, the court permitted enforcement of a federal judgment lien against the underlying California real estate.
Background of the Case
The United States brought an enforcement action against Robert Huckaby arising from an unpaid federal judgment. As the court explained:
“This case is an action seeking to enforce a judgment against defendant Robert Huckaby entered on March 30, 2018 for failure to honor IRS levies.”
The property at issue was a residence in South Lake Tahoe, California. The key facts were not disputed:
“Defendants are the Trust’s settlors, trustees, and its sole beneficiaries during their lifetimes.”
The defendants had transferred the California property into the Circle H Bar T Trust, which they characterized as a Nevada spendthrift trust.
The central legal issue was whether that trust structure could prevent a creditor—in this case, the United States—from enforcing a judgment lien against the property.
Which Law Governs: Nevada or California?
A critical part of the court’s analysis focused on choice of law.
The defendants argued that Nevada law should apply because the trust was designated as a Nevada trust. The court rejected that position for purposes of creditor enforcement and instead focused on the location of the asset.
Relying on established conflict-of-laws principles, the court explained:
“[W]hether the interest of a beneficiary of a trust of an interest in land is assignable by him and can be reached by his creditors, is determined by the law that would be applied by the courts of the situs.”
Because the property was located in California, the court applied California law:
“[B]ecause the Property is located in California, the court will apply California law in determining whether it is subject to enforcement of a judgment lien by plaintiff.”
This determination was dispositive.
California’s Treatment of Self-Settled Trusts
Under California law, self-settled trusts are not effective against creditors.
The court stated this principle directly:
“[U]nder California law, a settlor of a spendthrift trust cannot also act as a beneficiary of that trust (i.e., California law prohibits ‘self-settled’ trusts). California law voids self-settled trusts to prevent individuals from placing their property beyond the reach of their creditors while at the same time still reaping the bounties of such property.”
Applying that rule, the court found that the trust at issue fell squarely within this prohibition:
“[T]he Trust is a self-settled trust because it was formed by defendants Robert Paul Huckaby and Joyce Ann Tritsch as trustors, settlors, trustees, and beneficiaries of the Trust.”
As a result, the trust’s spendthrift provisions did not protect the property:
“[B]ecause the trust ‘is a self-settled trust, its spend-thrift provisions are void against defendants’ creditors, including the [United States].’”
Property Interest: Why the Creditor Could Reach the Asset
The court also addressed whether Huckaby had a sufficient property interest for the judgment lien to attach.
The answer was yes.
The court emphasized that both legal and equitable interests were present:
“[T]rust beneficiaries hold an equitable interest in trust property and are regarded as the real owners of that property.”
And:
“[L]egal title to property owned by a trust is held by the trustee.”
Because Huckaby was both a trustee and a beneficiary, the court concluded:
“Defendant Huckaby possesses both a legal and equitable interest in the Property.”
That was sufficient to allow enforcement of the judgment lien.
Court’s Holding
The court ultimately ruled in favor of the United States:
“The United States’ judgment lien encumbers defendant Huckaby’s one-half ownership interest in the Property.”
It further authorized foreclosure proceedings consistent with the judgment.
Key Takeaways
This decision reinforces several important principles for asset protection planning:
- Governing law clauses are not dispositive
Designating a trust under Nevada law does not control creditor rights when the asset at issue is real property located in another state. - Real property is treated differently
Courts consistently apply the law of the situs when determining whether a creditor can reach real estate held in trust. - Retained control remains critical
Where the same individuals serve as settlors, trustees, and beneficiaries, courts are unlikely to treat the trust as a barrier to creditor claims. - Substance prevails over form
The court did not rely on labels or formal designations but instead focused on ownership, control, and applicable law.
Conclusion
United States v. Huckaby reinforces a consistent judicial approach: asset protection strategies are evaluated based on legal substance, not structural labels.
When real estate is involved—particularly in jurisdictions like California—the combination of asset location and retained beneficial interest can override otherwise favorable trust designations.
For individuals structuring trusts that hold U.S. real property, this case illustrates the importance of aligning trust design, asset type, and governing law with how courts actually analyze creditor rights.
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At Dilendorf Law Firm, we assist U.S. and international clients with sophisticated cross-border estate, tax planning, and asset protection strategies. In addition to structuring trusts, we guide clients in protecting and optimizing traditional assets, including real estate, stocks, bonds, and diversified investment portfolios.
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.
