US Based Asset Protection Is Dead
US Citizens Are Unprotected As Asset Protection Fades into the Darkness for U.S. Trusts
WARNING: THE “TONI 1 vs. WHACKER” CASE TORPEDOED ALL USA ASSET PROTECTION
In a nutshell the Toni vs Whacker case has set a legal precedent where if you establish an asset protection trust in one of the 17 states that allow such a trust (the only states that have such a statutory asset protection) your trust can be pierced and you can lose your assets. It can happen when a judgment is entered against your trust over an allegation that you fraudulently transferred (moved assets into your trust within four years of filing bankruptcy or transferred the assets to hide them from creditors or others, especially when the transferred assets, such as real estate is located in another state; and Federal courts can take your assets even if the asset are located in your own state).
The Cook Islands does not recognize US bankruptcy rules and only has a 2 year fraudulent transfer rule. There is a 1 year statute of limitation for all other claims. If a wantabe asset taker misses those deadlines, the Cook Island Court will not even entertain a claim. And the entity suing has to go to the Cook Islands and post a bond to take on such a case.
US Federal courts regarding bankruptcy have a 4 year statute of limitation for allegations of fraudulent conveyance and up to a 5 year statute of limitation for many civil cases. Therefore, a US based asset protection trust offers little to no protection.
Basically, this case lets many courts completely unwind your asset protection, leaving your assets 100% unprotected. And, if the US government is after your assets, for whatever the reason, you are up a creek without the proverbial paddle without a Cook Island asset protection trust.
The above is an overly simplified explanation. This is a legally technical case that is not easy for lawyers to explain in everyday terms. For the not so faint of heart and those that want to know more you can continue reading as I have explained the Tony case in more detail below. But, at the end of the day the important thing to realize is the Toni vs Wacker case means your assets are are just not safe in US trusts, and certainly not even in the same universe as the safety found in a Cook Islands trust, which is why I recommend anyone who wants real protection to use a Cook Island Trusts which are out of the reach of US courts and attorneys when you follow the Cook Island trust rules.
LONGER EXPLANATION
A default judgment was entered in favor of the Wackers by a cause they also claimed that if an Alaskan court was the only court able to rule on the fraudulent conveyance matter, then such an action could be barred by the statute of limitations. Alaska law indicated that Alaska courts have “exclusive jurisdiction over an action brought under a cause of action or claim for relief that is based on a transfer of property to an Alaskan asset protection trust.”
While the Alaska Supreme Court stated that the Tangwalls were correct that a judgment would be void if the court that entered the judgment did not have subject matter jurisdiction (control where the asset is located) over the case, Alaska law does indicate that exclusive jurisdiction over fraudulent conveyance claims against an Alaskan asset protection trust rests with Alaskan courts, yet the court still concluded that Alaskan law cannot “prevent other state and federal courts from exercising subject matter jurisdiction (where the real estate was located) over fraudulent transfer actions against [Alaskan asset protection trusts].” In citing the United States Supreme Court ruling in Tennessee Coal, Iron, & R.R. Co. v. George, stating that “the Full Faith and Credit Clause does not compel states to follow another state’s statute claiming exclusive jurisdiction over suits based on a cause of action ‘even though [the other state] created the right of action’”, and especially because in Toni 1 the cause of action was not even created under Alaska law but rather it arose under Montana law so the Alaska Supreme Court held that the Montana state court judgements were not void for lack of jurisdiction. You can see just how messy this can get, and if a US asset trust does not protect you – it does not protect you and you must go elsewhere for protection.
Similarly, citing another United States Supreme Court case, Marshall v. Marshall, also making reference to the Supremacy Clause, the Alaska Supreme Court held that the federal bankruptcy court judgements were not void for lack of jurisdiction – meaning US Bankruptcy Court law defeats and trumps Alaskan law for asset protection trusts.
While the ruling in Toni 1 Trust is narrow and does not address many of the lingering issues surrounding the protections claimed to be afforded by Domestic Asset Protection Trust statutes and proponents thereof, this case is a nuclear detonation to asset protection in the 17 states that had such protection when the person establishing the trust funds their trust with property outside of the state where the trust was established. There is still no protection at all for the other 33 states.
The seventeen states with DAPT statutes are as follows: Alaska, Delaware, Hawaii, Michigan, Mississippi, Missouri, Nevada, Utah, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia, West Virginia and Wyoming.
The recent Alaska asset protection case known as “Toni 1” has ripped a hole in asset protection for real estate regarding allegations of fraudulent conveyances, bankruptcy, subject matter jurisdiction (court control over assets based on where the asset is located) combined with bankruptcy and full faith and credit in the US Constitution taking precedence over State asset protection laws. It is a legally technical case for non-lawyers to explain here, but the following will give you a good idea of why the last hope for real asset protection (and possibly over all asseMontana state court in the fraudulent transfer action; however, Toni Bertran filed for bankruptcy in Alaska under Chapter 7, making her interest in the property of the Toni 1 Trust subject to the jurisdiction of the federal bankruptcy court. As did the Montana state court, the federal bankruptcy court issued a default judgment in favor of the Wackers stating that the transfers were fraudulent as they were made to avoid judgments. So much for State’s rights since the US Constitution trumps State laws.
But wait, trying to use Alaska statutes , Donald Tangwall, as trustee of the Toni 1 Trust, brought an action against the Wackers in Alaska requesting that the federal bankruptcy judgments and Montana state court judgments be set aside as void because Alaskan courts have exclusive jurisdiction over fraudulent conveyance claims involving Alaska asset protection trusts. This argument would greatly benefit the Tangwalls bet protection) is dead, at least for now until there are cases and laws that are more favorable to those who want and need full asset protection.
In the 2019 Toni 1 Trust vs. Wacker out of Alaska, in a nutshell the court held that Seventeen states now have statutes allowing for the creation of a domestic asset protection trust (“DAPT”) (a trust that was supposed to protect your assets). Although these state statutes may exist in various forms, at their core DAPT statutes are created to allow a person, also known as the grantor, to create an irrevocable trust by transferring assets to the trust; to continue to enjoy, to have some control and beneficial enjoyment over the trust assets; and to shield the assets transferred to the trust from potential creditors. This trust was trying to copy the Cook Island Trust benefits. It was created in 1997 in Alaska. However, because State laws are subject to the US Constitution it was only a matter of time until the novel idea failed. The Cook Islands trust does not have this fatal flaw.
Here are the facts of Toni 1 Trust : During a period of time when a state court in Montana was issuing a number of judgments against Donald Tangwall, Donald’s wife Barbara Tangwall, and Donald’s mother-in-law Margaret (“Toni”) Bertran, in favor of the Wacker family, with whom the Tangwalls had been tied up in litigation with for years, Toni Bertran transferred certain real property to a trust created under Alaska law named “Toni 1 Trust.” The Wackers filed an action in Montana state court alleging the transfers of the real property to the Toni 1 Trust were fraudulent under Montana law because they were made in order to avoid the judgments issued and being issued against the Tangwalls.