Domestic Asset Protection Trusts, or DAPTs, are often presented as a powerful way to protect wealth from future creditors. But U.S. courts do not treat them as automatic shields.
When these trusts are tested in litigation, courts usually look beyond the label and focus on the real issues: who funded the trust, who controls it, when it was created, what law applies, and whether the trust was used to keep assets away from creditors or a spouse.
The cases show a simple pattern. A DAPT can work in some situations. But it can also fail, especially if the trust was created too late, if the settlor kept too much control, or if the dispute ends up in a state that does not favor self-settled asset protection trusts.
Courts Still Begin With a Traditional Rule
Even before modern DAPT statutes, American courts were skeptical of trusts created by a person for his or her own benefit. That basic principle still matters today.
In Vanderbilt Credit Corp. v. Chase Manhattan Bank, 100 A.D.2d 544, 473 N.Y.S.2d 242 (2d Dep’t 1984), the New York court stated: “[a] disposition in trust for the use of the creator is void as against the existing or subsequent creditors of the creator.” The court explained that this rule reflects the principle “that a property owner cannot utilize a spendthrift trust to insulate his assets from the reach of present or future creditors.”
Other courts have said the same thing in slightly different ways. In Menotte v. Brown (In re Brown), 303 F.3d 1261 (11th Cir. 2002), the Eleventh Circuit held that because the debtor was both the settlor and the beneficiary, “the spendthrift clause was ineffective as against her creditors.”
In In re Shurley, 171 B.R. 769 (Bankr. W.D. Tex. 1994), the bankruptcy court explained that “Either substantial control or self-settlement may operate to invalidate protective trust provisions,” and held that the debtor “exhibited sufficient dominion and control over the Trust assets to defeat the Trust’s protective character.”
That is the backdrop for every DAPT case. Courts do not forget the old rule just because a trust was formed in Nevada, Alaska, or Delaware.
A DAPT State’s Law Does Not Always Control
One of the most important DAPT decisions is In re Huber,493 B.R. 798 (Bankr. W.D. Wash. 2013). The debtor was a Washington resident who created an Alaska asset protection trust. On paper, the trust pointed to Alaska law. But the bankruptcy court refused to follow that choice.
The court found that “Alaska had only a minimal relation to the Trust,” while “Washington had a substantial relation to the Trust when the Trust was created.” It also stressed that “Washington State has a strong public policy against self-settled asset protection trusts.” Because of that, the court said it would “disregard the settlor’s choice of Alaska law” and apply Washington law instead.
That part of Huber is especially important for nonresident settlors. A trust created in a favorable DAPT state does not automatically receive that state’s protection if the settlor lives elsewhere and the dispute is centered elsewhere. Courts may instead apply the law of the state with the strongest connection to the parties, assets, and creditors.
The facts in Huber also mattered. The court pointed to evidence that the trust was meant to “protect and shield” assets from creditors and concluded that the debtor still effectively enjoyed the assets after the transfers. That combination made the trust difficult to defend.
Courts Do Not Let DAPT States Block Other Courts From Hearing Creditor Disputes
Another Alaska case, Toni 1 Trust v. Wacker, 413 P.3d 1199 (Alaska 2018), addressed a different issue. Alaska’s statute tried to make Alaska courts the exclusive forum for fraudulent transfer claims involving Alaska self-settled spendthrift trusts. The Alaska Supreme Court rejected that effort.
The court explained that the statute “purports to grant Alaska courts exclusive jurisdiction over fraudulent transfer claims against Alaska self-settled spendthrift trusts,” but held that Alaska “could not unilaterally deprive the Montana and bankruptcy courts of jurisdiction.”
It also said that the Full Faith and Credit Clause “does not compel states to follow another state’s statute claiming exclusive jurisdiction.”
This matters because DAPT planning is sometimes sold as though the trust state can control where every dispute must be heard. Toni 1 shows the limits of that idea. If another state court or a bankruptcy court otherwise has jurisdiction, the DAPT state cannot simply close the door.
Bankruptcy Law Can Override State-Law Protection
Bankruptcy remains one of the biggest risks for DAPT structures. In Battley v. Mortensen (In re Mortensen), 2011 WL 5025288 (Bankr. D. Alaska 2011), the bankruptcy court made clear that even if a trust complied with Alaska law, “that would not protect it from avoidance if the trustee could establish all the elements of § 548(e).”
That is the key point. State DAPT statutes do not exist above federal bankruptcy law. If a bankruptcy trustee can show the required elements under the Bankruptcy Code, the transfer can still be attacked.
Huber and Mortensen together show why bankruptcy is such a serious test for asset protection planning.
Family Courts May Also Refuse to Honor Out-Of-State DAPTs
DAPTs are not just tested by business creditors. They also come under pressure in divorce cases.
In Dahl v. Dahl, 2015 UT 23, 345 P.3d 566 (Utah 2015), the Utah Supreme Court considered a trust that pointed to Nevada law. The court refused to follow that choice.
It wrote: “Because Utah has a strong public policy interest in the equitable division of marital assets, we will not enforce the choice-of-law provision contained in the Trust. Instead, we construe the Trust according to Utah law.”
It then held: “We hold that the Trust is revocable under Utah law and that Ms. Dahl has an interest in the Trust property as a settlor of the Trust.”
The reasoning in Dahl is very practical. Utah law, the court explained, “presumes that property acquired during a marriage is marital property subject to equitable distribution.”
The court also warned that treating the trust as untouchable would allow “a spouse to shield marital property from equitable division in the event of divorce. And that is exactly what Dr. Dahl attempted to do in this case.”
So even if a trust is designed under the law of a DAPT state, that does not mean a divorce court in another state will honor it when doing so would undermine local family-law policy.
Some Courts Do Uphold DAPTs
The picture is not entirely negative. There are cases where courts have enforced DAPT statutes.
In Klabacka v. Nelson, 133 Nev. 164, 394 P.3d 940 (2017), the Nevada Supreme Court held that the trusts before it were “validly created self-settled spendthrift trusts.” It also held that, “[p]ursuant to NRS 166.090(1), trust assets could not be applied to support arrears.”
That makes Klabacka an important pro-DAPT case. It shows that a court in a DAPT-friendly state may enforce the trust when the statutory requirements are satisfied and the facts fit the statute.
Still, Klabacka should be read carefully. It reflects Nevada law and the specific facts of that case. It does not mean every self-settled trust will be enforced everywhere.
Delaware’s recent In the Matter of the CES 2007 Trust, C.A. No. 2023-0925-SEM (Del. Ch. May 2025), decision points in the same direction. There, the court recommended dismissal of a creditor’s challenge and held that “[t]he Trust is an Asset Protection Trust.” It further concluded that the petitioner “has failed to plead a reasonably conceivable claim for avoidance of the protections afforded to the Trust, and its beneficiaries, as an ‘Asset Protection Trust.’”
At the same time, the Delaware court did not say that every trust labeled “asset protection” must be respected.
It acknowledged the rule that courts “will not give effect to a spendthrift trust that has no economic reality and whose only function is to enable the settlor to control and enjoy the trust property without limitations or restraints.” On the facts before it, however, the court found no sufficient basis to disregard the trust.
So yes, courts do sometimes uphold DAPTs. But those cases usually involve stronger facts, better administration, and a forum willing to apply the favorable trust statute.
Timing Also Matters
Sometimes the issue is not only whether the trust was valid, but whether a creditor acted soon enough to challenge it.
In TrustCo Bank v. Mathews, C.A. No. 8374-VCP, 2015 WL 295373 (Del. Ch. Jan. 22, 2015), the Delaware Chancery Court treated the fraudulent transfer claims as time-barred. That decision is useful because it shows that DAPT disputes can turn on timing and limitations rules, not just on the structure of the trust itself.
For planners, this cuts both ways. A transfer made in the face of a looming dispute can look suspicious. But an older transfer may become harder to unwind if the creditor waits too long.
What These Cases Really Show
When read together, the cases tell a practical story.
Courts are most skeptical when a trust looks reactive, heavily controlled by the settlor, or tied to a state that has little real connection to the dispute. Courts are more open to enforcing DAPTs when the trust was formed early, administered properly, and clearly meets the governing statute’s requirements.
In other words, courts do not ask only whether a trust is called a DAPT. They ask whether the structure has real legal substance.
Conclusion
U.S. courts do not treat DAPTs as bulletproof. They treat them as legal structures that must survive challenges based on public policy, fraudulent transfer law, bankruptcy law, family-law principles, and the actual facts of control and administration.
A properly structured DAPT may provide meaningful protection. But if the trust is created too late, if the settlor keeps too much control, or if the case is heard in a state that does not favor self-settled asset protection, the trust may not hold up.
At Dilendorf Law Firm, we represent both U.S. and non-U.S. clients in the formation of domestic and international trust structures. Our practice includes guiding clients on asset protection strategies as well as the tax planning considerations that accompany these structures across jurisdictions.
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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.
Real Estate Tokenization (RWA) Explained: Legal Framework & Key Considerations
Real-world asset (RWA) tokenization—particularly in real estate—is one of the fastest-growing areas in the digital asset industry.
However, many sponsors, developers, and investors underestimate the legal, regulatory, and operational complexities involved in launching a compliant tokenization project.
Below is a video presentation by Max Dilendorf, a New York–based attorney who has been advising clients in the crypto and digital asset space since 2017, and one of the first lawyers in the United States to focus his practice on digital assets and cryptocurrencies.
▶️ Watch the Video
What This Video Covers
In this presentation, Max Dilendorf explains the core legal principles behind tokenizing real estate and other real-world assets, including:
Why tokenization is not simply “putting an asset on the blockchain,” but rather issuing a security subject to U.S. laws
Key regulatory frameworks, including Regulation D and Regulation A+ under the Securities Act of 1933
Investment Company Act exemptions such as 3(c)(1) and 3(c)(7)
Transfer restrictions, resale limitations, and secondary market trading requirements
The role of broker-dealers, transfer agents, and Alternative Trading Systems (ATS)
The video also includes a real-world example of institutional tokenization, including the 2024 launch of a tokenized fund by BlackRock using Securitize’s regulated infrastructure.
Beyond Real Estate: Tokenization Across Asset Classes
While the focus is on real estate, the same legal principles apply to a wide range of tokenized assets, including:
Private equity and venture investments
Music rights and royalty streams
Film and entertainment financing
Art and other alternative assets
Key Legal & Operational Challenges
This video highlights several critical issues that must be addressed when launching an RWA tokenization project:
Choosing the correct securities exemption and investor eligibility requirements
Structuring entities (LLC vs. C-corp) for tax and compliance efficiency
Addressing lender consent for mortgaged real estate
Designing token economics, investor rights, and redemption mechanics
Evaluating liquidity expectations and secondary trading limitations
Navigating cross-border offerings and international compliance
Cybersecurity & Custody Risks
A significant portion of the discussion focuses on cybersecurity and custody risks.
Our firm has handled over 100 matters involving cyberattacks, stolen digital assets, and custody failures—including incidents involving accounts held at major platforms such as Coinbase and Gemini.
If you are launching a tokenization project, it is critical to evaluate:
Platform security and custody infrastructure
SOC 2 certification and audit history
Alignment with frameworks such as National Institute of Standards and Technology
Regulatory oversight of service providers
RWA Tokenization Legal Services
At Dilendorf Law Firm, we advise clients through the full lifecycle of digital asset and tokenization projects, including:
Tokenization of real estate, equity, music, and entertainment assets
Structuring securities offerings under U.S. law (Reg D, Reg A+, and others)
Broker-dealer licensing for digital securities
Alternative Trading System (ATS) structuring and regulatory strategy
Money transmitter licensing for blockchain and digital asset platforms
Compliance with SEC, FINRA, FinCEN, and state-level regulations
Contact Us for a Consultation
If you are considering an RWA tokenization project or need guidance on structuring, licensing, or compliance, we invite you to contact us:
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A Green Card is often seen as a gateway to opportunity – but it can also create significant and unexpected tax exposure.
Many individuals assume that once they leave the United States, their U.S. tax obligations end. In reality, holding a Green Card may continue to subject individuals to U.S. taxation on their worldwide income – regardless of where they reside.
As long as an individual remains a lawful permanent resident (i.e., a Green Card holder), the United States generally treats that individual as a U.S. tax resident. This means that global income – not just U.S.-source earnings – may fall within the scope of U.S. taxation.
For individuals living abroad, this often comes as an unexpected – and sometimes costly – surprise.
This outcome is driven by a fundamental feature of the U.S. tax system: worldwide taxation. Unlike most countries, which tax individuals based primarily on residency, the United States applies this system to both its citizens and lawful permanent residents.
Understanding these rules is critical when evaluating whether to maintain or relinquish Green Card status, particularly in light of the “8-year rule” and potential exit tax exposure.
Understanding the 8-Year Rule for Green Card Holders
Under 26 U.S.C. § 877A, a Green Card holder may be classified as a “long-term resident” for U.S. tax purposes if they have held lawful permanent resident status in at least 8 of the last 15 taxable years.
This classification is critical because it determines whether an individual may become subject to the U.S. expatriation tax regime upon relinquishing Green Card status.
Who Is a “Long-Term Resident”?
For purposes of the expatriation tax rules, a long-term resident is an individual who:
Has been a lawful permanent resident of the United States; and
Held that status in 8 or more taxable years during the 15-year period ending with the year of relinquishment
Importantly, even partial years may count, depending on the period during which Green Card status was held.
What Happens After 8 Years?
If a Green Card holder meets the “long-term resident” threshold and later relinquishes that status, they may become subject to the U.S. expatriation tax regime under 26 U.S.C. § 877A.
However, this treatment does not apply automatically. The key question is whether the individual is classified as a “covered expatriate” within the meaning of the statute.
In general, an individual will be treated as a covered expatriate if they meet one or more of the following conditions at the time of relinquishment:
A net worth of $2 million or more
An average annual U.S. income tax liability above a specified threshold (adjusted annually; e.g., $206,000 for 2025)
Failure to certify full compliance with U.S. tax obligations for the preceding five (5) years
These tests operate independently: meeting any one of them may result in covered expatriate status.
Exit Tax: The Core Consequence
If an individual is classified as a covered expatriate, they may be subject to a “mark-to-market” exit tax under 26 U.S.C. § 877A.
In practical terms, the individual is treated as if they sold all of their worldwide assets at fair market value on the day before expatriation.
As a result:
Unrealized gains (e.g., on stocks, real estate, or business interests) may become immediately taxable
A statutory exclusion amount applies to the aggregate gain (adjusted annually for inflation; $890,000 for 2025)
Any gain exceeding that exclusion is generally subject to capital gains tax
For example, an individual holding a portfolio of appreciated assets – such as shares, real estate, a privately held business, or digital assets (including cryptocurrency) – may face a substantial tax liability upon expatriation if those gains have not yet been realized. In some cases, this can result in a six- or even seven-figure tax exposure triggered solely by the act of relinquishing Green Card status.
Why Timing Matters
This is where the 8-year rule becomes particularly important.
Before reaching long-term resident status, individuals may be able to relinquish their Green Card without triggering the expatriation tax regime under 26 U.S.C. § 877A.
After crossing that threshold, however, the analysis becomes significantly more complex and may require advance planning to mitigate potential tax exposure.
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If you are evaluating whether to maintain or relinquish your Green Card, careful tax and legal planning can help manage risk and avoid unintended consequences, particularly in light of the 8-year rule, potential “covered expatriate” status, and exit tax exposure.
Dilendorf Law Firm advises individuals on expatriation planning, U.S. tax compliance, and cross-border structuring. Our work includes analysis under 26 U.S.C. § 877A, modeling potential exit tax outcomes, reviewing prior U.S. tax filings and reporting obligations (including FBAR and FATCA), and assisting clients in meeting certification requirements to avoid adverse tax treatment.
We also assist with pre-expatriation planning, including net worth and income tax threshold analysis, timing of asset dispositions, and coordination with foreign advisors to address post-exit tax treatment. In addition, we support clients with final U.S. tax filings, including Form 8854, and advise on ongoing U.S. tax obligations for nonresident individuals.
The decision in United States v. Huckabyprovides 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.
Contact Us
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.
This video explains why foreign nationals considering a move to the United States must understand how U.S. estate and income tax rules can apply to their U.S. and worldwide assets, and why pre‑immigration planning is essential.
The $60,000 estate tax number
Under U.S. estate tax rules, a nonresident non‑citizen generally gets only a $60,000 estate tax exemption for U.S.‑situs assets (such as U.S. real estate and certain U.S. securities).
Above that amount, the federal estate tax under 26 U.S.C. § 2001 applies at graduated rates up to 40 percent.
In practice, this means that if a foreign national dies owning, for example, a $1,000,000 U.S. condominium while still a nonresident for estate tax purposes, roughly $940,000 could be exposed to the U.S. estate tax, potentially generating a tax bill in the hundreds of thousands of dollars.
How this differs for U.S. citizens and domiciliaries
By contrast, U.S. citizens and individuals domiciled in the U.S. benefit from a much higher federal estate tax exemption through the unified credit in 26 U.S.C. § 2010, which shields a multi‑million‑dollar amount per person from estate tax.
Married couples can generally combine their exemptions, effectively doubling the protection available to the family under current law.
This creates a dramatic gap between the treatment of nonresident non‑citizens with only a $60,000 exemption and U.S. taxpayers with multi‑million‑dollar exemptions.
The “domicile” trap for estate tax
The video then focuses on the concept of U.S. domicile for estate tax purposes, which is different from immigration status.
Under 26 U.S.C. § 2001(a), if an individual is a U.S. citizen or domiciled in the United States at death, the federal estate tax applies to their worldwide assets, not just U.S. property.
Domicile is determined under federal estate and gift tax principles by physical presence plus intent to remain indefinitely, not by the specific visa category (E‑2, H‑1B, L‑1, etc.).
Courts have repeatedly emphasized that intent and factual ties control domicile, including:
Estate of Newcomb v. Commissioner (early leading authority on domicile focusing on intent and facts of life).
Estate of Jack v. United States, 54 Fed. Cl. 590 (2002), where the court looked at factors such as family, residence, and long‑term ties rather than the temporary nature of the decedent’s immigration status.
Estate of Khan v. Commissioner, T.C. Memo 1998‑22, which illustrates how lifestyle, statements, and connections to the U.S. can lead to a finding of U.S. domicile even for a foreign national.
Once U.S. domicile is found, U.S. estate tax can apply to foreign real estate, overseas investment portfolios, private companies, and other global assets owned at death.
Worldwide income tax after U.S. residency
The video also explains that once someone becomes a U.S. income tax resident—often by obtaining a green card (including via EB‑5) or meeting the substantial presence test—the U.S. generally taxes their worldwide income.
Key statutory rules include:
26 U.S.C. § 61(a), which defines gross income broadly as “all income from whatever source derived,” covering foreign and domestic income alike.
26 U.S.C. § 1, which imposes income tax on taxable income of individuals.
26 U.S.C. § 7701(b), which sets out who is treated as a U.S. resident for income tax purposes, including green card holders and those meeting the substantial presence test.
If you bought a foreign property for $100,000 and later sell it for $1,000,000 after becoming a U.S. tax resident, the $900,000 gain is generally taxable in the United States.
This is true even though the property is overseas and most of the appreciation happened before you moved.
The same worldwide‑tax principle typically applies to foreign securities, crypto, private equity, and operating businesses, unless specific planning, a tax treaty, or a targeted exception changes the result.
Why pre‑immigration tax planning matters
The core message is that many of the most effective strategies must be implemented before U.S. tax residency or U.S. domicile is established.
Coordinating cross‑border ownership of U.S. real estate, U.S. equities, and operating businesses to minimize U.S. estate tax under 26 U.S.C. §§ 2001 and 2101–2107 while preserving treaty benefits where available.
Implementing insurance‑based planning, especially Private Placement Life Insurance (PPLI) arranged before U.S. residency, so that investment growth occurs inside a properly structured life insurance contract.
For PPLI and life insurance–based structures, the relevant provisions include:
26 U.S.C. § 7702, which defines what qualifies as a life insurance contract for U.S. tax purposes.
26 U.S.C. § 72, which governs the income tax treatment of amounts received under annuity and life insurance contracts.
26 U.S.C. § 101(a), which generally excludes life insurance death benefits from gross income for U.S. income tax purposes, subject to specific exceptions.
Properly designed PPLI can allow tax‑deferred growth inside the policy. The death benefit is generally received income‑tax‑free by beneficiaries under U.S. rules. At the same time, PPLI can be integrated with broader estate planning and asset protection structures.
This is especially powerful for international families who hold concentrated stock positions, private equity, crypto, or operating businesses.
The video stresses that, once U.S. domicile or income tax residency exists, many of these restructuring options either disappear or become far more limited and complex to execute.
Contact Us
Max Dilendorf and Dilendorf Law Firm assist non‑U.S. residents with complex tax planning, structuring U.S. investments in U.S. equities and real estate, and a wide range of private client estate and asset protection matters.
Max has more than 15 years of experience advising U.S. and international high‑net‑worth clients on pre‑immigration tax planning, trust formations, cross‑border investment structures, and U.S. real estate transactions.
To discuss your situation in confidence, you can email Max directly at max@dilendorf.com or contact our firm to schedule a consultation
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
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.
U.S. & International Asset Protection and Estate Planning for High-Risk Professionals and Global Entrepreneurs
In this video, Max Dilendorf, founder of Dilendorf Law Firm, explains how individuals and business owners can protect assets in an increasingly aggressive legal and regulatory environment through sophisticated U.S. and international planning strategies.
Dilendorf Law Firm represents U.S. and non-U.S. clients worldwide, including doctors, surgeons, physicians, entrepreneurs, real estate developers, architects, and other high-risk professionals who require advanced asset protection and long-term wealth preservation.
We also advise international clients moving businesses or investments to the United States, providing cross-border tax planning, tax structuring, and U.S. business formation services.
The video discusses both onshore and offshore asset protection solutions, including:
U.S. asset protection trusts and dynasty trusts in favorable jurisdictions such as Alaska, Wyoming, Delaware, and South Dakota
Offshore trust and holding structures in jurisdictions including the Cayman Islands, Cook Islands, Switzerland, Liechtenstein, Nevis, and the United Arab Emirates
Integrated estate planning for families with U.S. and international assets
Compliant planning for U.S. and foreign real estate ownership
Max also addresses the firm’s extensive experience in crypto law and digital asset protection, including secure custody strategies and crypto-related litigation, and how digital assets can be incorporated into a broader asset protection and estate planning framework.
Whether you are a U.S. professional seeking protection from litigation risk, or an international business owner navigating U.S. tax and compliance rules, this video outlines how a carefully structured, fully compliant global “Plan B” can help safeguard wealth across borders.
Contact Us
If you are considering U.S. or international asset protection, estate planning, or cross-border business structuring, contact Dilendorf Law Firm for a confidential consultation.
Our team works with clients in the United States and internationally to develop compliant, strategic solutions tailored to complex risk profiles and global assets.
Domestic Asset Protection Trusts (“DAPTs”) are often criticized as ineffective or vulnerable to creditor attack—especially when the trust creator lives outside the state where the trust is formed.
A recent decision from the Delaware Court of Chancery, however, shows that when properly structured and administered, a Delaware DAPT can withstand aggressive creditor challenges—even when the grantor is a non-resident and the trust indirectly holds valuable real estate.
The case, In the Matter of the CES 2007 Trust, involved a Michigan judgment creditor attempting to reach assets held through a Delaware trust structure. The court rejected those efforts in full and recommended dismissal at the pleading stage.
The Setup: A Michigan Grantor, a Delaware Trust, and Real Estate Held Through LLCs
The trust at issue was created in 2007, years before the underlying Michigan litigation. The grantor was not a Delaware resident. Instead, he used Delaware law to establish a self-settled asset protection trust.
Crucially, the trust did not own real estate directly. Instead, it owned membership interests in Delaware LLCs, and those LLCs owned the real property:
“In pertinent part, the Trust’s assets include a ninety-percent interest in three Delaware limited liability companies…”
Those LLCs, in turn, held real estate in Michigan and Colorado, including residential and commercial properties.
This structure mattered. Under Delaware law:
“A limited liability company interest is personal property. A member has no interest in specific limited liability company property.”
Because the trust owned LLC interests—not the real estate itself—the creditor’s attempt to collapse the structure failed.
Why the Court Refused to “Look Through” the LLCs
The creditor urged the court to disregard the LLC structure, treat the real estate as trust property, and characterize various historical transfers as fraudulent.
The court refused.
It held that it would be inappropriate to adjudicate real estate transactions at the LLC level in an action targeting the trust’s spendthrift provision:
“It would be inappropriate for this Court, through this type of proceeding, to adjudge the real estate transactions at the LLC level under the guise of potential fraudulent transfer sufficient to void the Trust’s spendthrift provision.”
The court went further:
“There are, simply put, no transfers to/from the Trust which would give rise to such an inquiry, and the Petitioner has pled no basis on which this Court should engage in veil piercing.”
This is a critical point for asset protection planning. DAPTs are evaluated based on what the trust owns—not what its subsidiaries own.
Out-of-State Grantors and Delaware Law
Another important aspect of the case is that the grantor was not a Delaware resident. The underlying judgment arose in Michigan. The real estate was located outside Delaware. Yet Delaware law governed the trust.
The court emphasized that Delaware expressly authorizes self-settled asset protection trusts, provided statutory requirements are met:
“In 1997, Delaware codified the ability to create Delaware self-settled asset protection, or qualified disposition, trusts.”
The trust satisfied those requirements, including:
Invocation of Delaware law
An enforceable spendthrift provision
Irrevocability
Transfers to a qualified trustee
The court found no statutory defect simply because the grantor lived elsewhere.
Trustee Independence and “Control” Arguments
A common creditor argument in DAPT cases is that the grantor retained too much control, effectively acting as the trustee in disguise.
That argument failed here.
The trust had an independent, qualified Delaware trustee. The grantor retained certain advisory powers—but Delaware law expressly permits this.
As the court explained:
“As advisor, the Respondent has the power to manage investments and delegate authority in accordance with his fiduciary duties.”
The court rejected the notion that advisory roles or business management automatically destroy asset protection, noting the statutory framework that allows settlors to appoint advisors and trust protectors.
Common Law Attacks: Public Policy and “Sham Trust” Claims
The creditor also attempted a fallback strategy: arguing that even if the trust met statutory requirements, it should be invalidated under common law doctrines.
Delaware courts recognize that avenue—but apply it narrowly.
The court reiterated that Delaware will not enforce a spendthrift trust that lacks economic reality and exists solely to allow the settlor to enjoy assets without restraint. But that was not the case here.
The court concluded:
“Neither doctrine supports the Petitioner’s request for relief in this action.”
And explicitly declined to recharacterize the structure:
“I decline to pierce down, treat the LLCs as shams or alter egos […] and convert the Trust’s membership interests therein to real property interests.”
The Outcome: Dismissal at the Pleading Stage
After reviewing the trust’s structure, governance, and statutory compliance, the court reached a clear conclusion:
“The Petitioner has failed to state a claim to void the spendthrift provision of the Trust or invalidate the Trust altogether.”
The recommended result:
“The Respondent’s motion to dismiss the Amended Petition should be granted, and the Amended Petition should be dismissed.”
What This Case Means for Asset Protection Planning
This decision reinforces a central principle we emphasize in our asset protection practice: effective planning is not about evasion—it is about structure, discipline, and statutory compliance.
When those elements are present, courts will respect the plan, even under aggressive creditor attack.
At Dilendorf Law Firm, we represent high-risk professionals and entrepreneurs whose personal and professional exposure makes proactive asset protection essential.
We represent physicians, surgeons, medical specialists, real estate developers, builders, business owners, and investors—individuals whose success often places them squarely in the crosshairs of litigation.
The Delaware Court of Chancery’s decision in In the Matter of the CES 2007 Trust underscores several planning principles that are directly relevant to this clientele:
DAPTs can protect assets even when the grantor lives in another state
LLC layering matters—owning real estate indirectly can be decisive
Qualified trustees and statutory compliance are non-negotiable
Retained advisory powers do not automatically defeat asset protection
At Dilendorf Law Firm, we assist U.S. and non-U.S. clients protect a wide range of assets, including:
Income-producing and investment real estate
Operating businesses and development projects
Investment portfolios (public and private securities)
Cryptocurrency and digital assets
Cash reserves and alternative investments
This case also serves as a reminder that timing matters.
The trust in question was established years before the underlying litigation—an essential factor in surviving fraudulent transfer challenges.
Asset protection is most effective when implemented before a claim arises, not in reaction to one.
Ultimately, CES 2007 confirms what sophisticated planners already understand: well-designed Delaware DAPTs—combined with disciplined administration and proper entity structuring—remain a powerful tool for protecting wealth against future creditor risk.
For high-exposure professionals and investors, asset protection is not a luxury. It is a core component of long-term financial and estate planning—and when done correctly, courts will enforce it.
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.
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.
This video explains how U.S. courts treat foreign companies that own overseas real estate. It focuses on what this means for U.S. buyers with property in places like Dubai, Spain, and Italy.
The discussion uses Wells Fargo Bank, N.A. v. Barber, 85 F. Supp. 3d 1308 (M.D. Fla. 2015) as a case study. In that case, a Nevis LLC owned by a Florida resident was treated as intangible personal property located in Florida. That allowed creditors to reach the LLC interest under Florida law instead of Nevis law.
The same idea appears in other states. Jurisdictions like New York, California, and Texas let creditors obtain charging orders and, in some cases, foreclose or force a sale of LLC interests, especially in single‑member entities.
So, holding foreign real estate in your own name—or only through a foreign company—can leave it exposed to U.S. creditor claims.
The video stresses that planning must be legal and proactive. It does not endorse evading valid debts or making fraudulent transfers.
Next, the episode looks at better structures. It explains how U.S. Domestic Asset Protection Trusts in Alaska, Delaware, South Dakota, Nevada, and Wyoming can be used to own entities that hold foreign real estate.
It also covers offshore planning, including Cook Islands Trusts, for U.S. and international clients.
When these structures are set up early and with proper tax and reporting analysis, they can add separation between the person and the asset. They also help align foreign real estate with long‑term estate and wealth planning goals.
If you are buying or already own property abroad, the video encourages you to integrate that asset into a U.S. asset protection and estate plan, whether domestic or offshore.
To discuss your situation, you can contact Dilendorf Law Firm at info@dilendorf.com or 212.457.5757 for a confidential consultation.
Disclaimer: Attorney Advertising. This post and video are for general information only. They are not legal, tax, or investment advice and do not create an attorney–client relationship. Laws change, and results depend on specific facts and jurisdictions. Always consult your own legal and tax advisors before acting on any planning strategy.
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