By 2007, as the real estate markets were starting to sink, Donald and one of his business partners, Robert Terhune (Robert), began to worry about certain of their real estate projects and their commitments to each other. When Robert threatened to set up an asset protection trust to stiff Donald, Donald’s attorney made it clear to Robert that Donald would consider the setting up of such a trust to be a fraudulent transfer as to Donald as Robert’s potential creditor.
If done right, asset protection is an expected result of proper legal planning. But if done wrong, asset protection can be misused as a means to deceive lawful creditors. Make note, this type of planning is no “game” to be won by trickery.
The case of Waldron v. Huber is illustrative of what not to do.
The Huber case was complicated--it included Alaska LLCs, Washington properties, a failing partnership, and a Domestic Asset Protection Trust (DAPT). A recent Forbes article, titled “Domestic Asset Protection Trust Blows Up Bigger Than Alaska In Huber Case,” describes the outcome.
The court found that the “too-good-to-be-true” asset protection planning was (you guessed it) too good to be true. If you’re interested in a detailed analysis, check out the Forbes article. But the moral of the story is that asset protection planning can only go so far. Make sure you talk with a qualified attorney before engaging in any such planning.
Reference: Forbes (May 22, 2013) “Domestic Asset Protection Trust Blows Up Bigger Than Alaska In Huber Case”