Rush v. Sessions: When Trusts Fail to Protect Assets

In Rush University Medical Center v. Sessions, an Illinois appellate court examined whether assets transferred into trusts—including an offshore Cook Islands trust—could be reached by a creditor enforcing a $1.5 million obligation.

Years earlier, the individual in the case made an irrevocable pledge to Rush University Medical Center. Later, he transferred substantially all of his assets into trusts.

At his death, the probate estate contained less than $100,000. Rush obtained a judgment against the estate and then pursued the trust assets, disputing that the transfers could be used to avoid payment of a known obligation.

The significance of the case lies not in the size of the pledge or the offshore element, but in the clarity with which the court explained how judges evaluate trusts when creditor rights and public policy are at stake.

Rather than focusing on drafting sophistication or jurisdiction, the court examined control, benefit, timing, and real-world effect—illustrating a consistent judicial theme: substance prevails over structure.

Courts Look at Results, Not Paperwork

Trusts are often described as technical planning tools whose effectiveness depends on formal compliance and careful drafting. In litigation, courts take a different approach. When creditor claims are involved, judges focus on what the planning actually accomplished.

As the trial court found: “As all the evidence clearly shows, he did everything that is possible to avoid the payment of the pledge.”

That finding frames the court’s analysis. The question was not whether a trust existed, but whether the trust functioned as a mechanism to avoid a known obligation.

Timing and Conduct Matter More Than Labels

Courts do not require an admission of intent. Instead, intent is inferred from conduct, timing, and outcome.

Based on the record, the court concluded:

“[…] he [Decedent] never intended to fulfill his pledge, and every course of action he took was with the intent to avoid the fulfillment of the pledge.”

This conclusion rested on the sequence of events and the movement of assets—not on technical deficiencies in the trust documents.

Judges Will Say It Plainly When Assets Are Moved to Block Creditors

When asset transfers effectively prevent a creditor from enforcing a valid claim, courts do not soften their language.

In unusually direct terms, the trial court stated:

“He even went so far as to defraud the hospital by transferring all of his assets into trusts so they could not be reached by the hospital.”

This language reflects an important reality: a trust does not neutralize conduct that a court views as improper or abusive.

Self-Settled Trusts Receive Heightened Scrutiny

One of Rush’s claims argued that the decedent’s transfer of assets into a self-settled trust should be treated as automatically invalid under earlier Illinois cases, including Crane and Barash.

As the appellate court summarized the Crane rule: “[…] self-settled spendthrift trusts are fraudulent and per se void and may be reached by other creditors.”

The appellate court, however, held that modern fraudulent-transfer claims must be pleaded under the Illinois Fraudulent Transfer Act and that this claim did not allege the statutory elements required by the statute.

Statutes Do Not Eliminate Substantive Review

The trustees argued that modern fraudulent-transfer statutes displaced common-law rules governing trusts. The appellate court rejected that position.

As the opinion makes clear:

“[…] the Fraudulent Transfer Act and the common law cannot exist in harmony.”

And further:

“If the legislature intended self-settled trusts to remain per se fraudulent under the common law, it would not have promulgated a statute defining the conditions required to prove a transfer was fraudulent.”

The court emphasized that statutory pleading requirements matter—but compliance with statutory form does not eliminate substantive judicial scrutiny.

Procedure Can Affect Outcomes, But It Does Not Resolve Substantive Risk

The appellate court reversed summary judgment on one of Rush’s claims because it relied solely on a per se common-law theory and did not allege the elements required under the Illinois Fraudulent Transfer Act.

As the court explained: “[…] a party is required to allege the elements contained in the Fraudulent Transfer Act to properly plead a fraudulent transfer claim.”

Importantly, the ruling addressed how the claim was pleaded, not whether the trust structure itself insulated assets from creditor scrutiny. A failure to plead statutory elements may defeat a claim on procedural grounds, but it does not render a challenged trust structure substantively immune from attack.

Judges Are Entitled to Draw Conclusions From the Record

The trustees also argued that the trial judge should have been disqualified for bias. The appellate court rejected that argument and clarified the governing standard.

Addressing the issue directly, the court explained:

“[…] [o]pinions formed by the judge on the basis of facts introduced or events occurring in the course of the current proceeding *** do not constitute a basis for a partiality motion unless they display a deep-seated favoritism or antagonism that would make fair judgment impossible.”

Courts are expected to evaluate evidence and reach conclusions—including conclusions about intent and avoidance behavior.

The Practical Takeaway

Rush University Medical Center v. Sessions shows that courts do not approach trusts as planning instruments — they approach them as enforcement targets.

When a trust is challenged, judges reconstruct the transaction from the record and ask whether the structure actually changed economic reality or merely changed legal title. If a trust allows an individual to avoid a known obligation while preserving access to or benefit from the assets, courts are prepared to disregard formal structure and apply creditor-protection principles.

The case highlights that even carefully planned trusts may fail to block creditor claims when courts examine how the structure operates in practice.

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.

Each client’s circumstances are unique. Effective planning requires more than technical precision—it calls for a strategic and nuanced approach that anticipates both judicial scrutiny and creditor challenges. The Illinois appellate decision in Rush University Medical Center v. Sessions serves as a clear reminder that courts focus on substance over form, evaluating control, timing, and economic reality rather than mere formalities.

Whether establishing a self-settled domestic trust or layering international components across multiple jurisdictions, we guide clients through complex legal, regulatory, and practical considerations to build structures that are both defensible and effective.

To discuss how our experience and global network can support your planning goals, contact us at info@dilendorf.com or by calling us at 212.457.9797 to discuss your needs.