Attorneys in states without an asset protection trust statute often ask how a self-settled trust formed under another state's law will hold up if the client is sued. I went through every reported United States decision on a domestic asset protection trust. There are fourteen: three for the trust, ten against the settlor, and one mixed. The headline is not the score. Every adverse decision turned on something the settlor or the drafter did.
Timing decided most of them: trusts funded after a claim existed or while one was gathering. Settlor control defeated the rest: brothers, sons, employees and the settlor himself serving as trustee. The drafting failures were severe, including a trust that recited creditor avoidance as its purpose and another that reserved an unlimited power to amend. Marriage and out-of-state land were the recurring soft spots. The two clean creditor cases the trust won involved trusts funded years before the debt existed, with no role for the settlor.
The full piece, with the clean-trust checklist, is at turnipseed.law.
