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Keywords

motionsummary judgmenttrustbankruptcymotion for summary judgment

summary judgmenttrust

Related Cases

In re Huber, 493 B.R. 798

Facts

Donald G. Huber, a real estate developer, created the Donald Huber Family Trust in September 2008, shortly before filing for bankruptcy in February 2011. The trust was established to protect his assets from creditors, as Huber faced significant financial difficulties due to the declining real estate market. He transferred various assets, including cash and interests in multiple entities, into the trust, which was governed by Alaska law, despite residing in Washington where such trusts are not recognized. The trustee, Mark D. Waldron, sought to invalidate these transfers and deny Huber a bankruptcy discharge.

The Debtor subsequently retained Mr. Snow to set up an asset protection trust, called the Donald Huber Family Trust (Trust), which was established on September 23, 2008. Correspondence after drafting the Trust document acknowledges that one of the Debtor's principal goals for creating the Trust was to 'protect a portion of [the Debtor's] assets from [his] creditors.'

Issue

Whether the self-settled trust created by the debtor was valid under Washington law, and whether the transfers into the trust could be set aside as fraudulent.

The Trustee contends that the Trust should be invalidated under Washington State law.

Rule

Under Washington law, specifically RCW 19.36.020, transfers made to self-settled trusts are void as against existing or future creditors. The court also considered the Restatement (Second) of Conflict of Laws regarding the validity of trusts and the substantial relation of the governing law to the trust.

RCW 19.36.020 provides in relevant part as follows: That all deeds of gift, all conveyances, and all transfers or assignments, verbal or written, of goods, chattels or things in action, made in trust for the use of the person making the same, shall be void as against the existing or subsequent creditors of such person.

Analysis

The court determined that the debtor's choice of Alaska law to govern the trust would not be honored because Alaska had minimal relation to the trust, while Washington had a substantial relation. The court applied Washington law, which voids self-settled trusts, concluding that the transfers made by the debtor into the trust were invalid. However, the court found that there were genuine issues of material fact regarding the debtor's intent to defraud creditors, which precluded summary judgment on the denial-of-discharge claim.

Accordingly, while Alaska had only a minimal relation to the Trust, using the test set forth in Comment b, Washington had a substantial relation to the Trust when the Trust was created.

Conclusion

The court granted the trustee's motion for summary judgment in part, declaring the transfers into the self-settled trust void under Washington law, but denied the motion in part regarding the denial-of-discharge claim due to unresolved factual issues.

The Court concludes that the Trustee has not met its burden on the alter ego theory. Notwithstanding this, in light of the Court's decision as to the invalidity of the transfers pursuant to RCW 19.36.020, the Court need not decide the alter ego issue under Washington law.

Who won?

The trustee, Mark D. Waldron, prevailed in part by having the transfers into the self-settled trust declared void under Washington law, as the court found that the law of the debtor's home state should apply.

The Trustee is entitled to summary judgment as a matter of law to the extent the Trustee seeks to have the transfers invalidated.

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