## Facts

- Donald G. Huber, a Washington resident engaged in real estate development, faced severe financial distress after the 2007 market collapse, including creditor pressure and impending foreclosures.
- In August 2008, Huber created the “Donald Huber Family Trust,” a self-settled domestic asset protection trust (DAPT) drafted to be governed by Alaska law.
- Alaska USA Trust Company and Huber’s son (Kevin Huber) served as co-trustees; the trust’s operational connection to Alaska was minimal, while most assets and activity remained in Washington.
- Huber transferred more than 70% of his assets to the trust without consideration, primarily moving healthier assets and receivables while leaving distressed assets outside the trust.
- Despite the transfer, Huber continued to receive substantial benefits, including monthly distributions of about $14,500 and additional approved requests.
- Huber filed Chapter 11 bankruptcy in February 2011 in the Western District of Washington; the case later converted to Chapter 7.
- The Chapter 7 trustee brought an adversary proceeding seeking (1) avoidance of the transfers as fraudulent, (2) invalidation of the trust’s spendthrift/asset-protection effect, and (3) denial of discharge and related theories.
- The trustee moved for partial summary judgment on claims concerning the transfers and trust invalidity, and on denial of discharge.

## Issues

1. Whether Washington or Alaska law governed the self-settled trust, given the trust’s Alaska choice-of-law clause and Washington’s relationship to the debtor, creditors, and assets.
2. Whether transfers to the self-settled trust were avoidable as fraudulent under Washington’s Uniform Fraudulent Transfer Act and under 11 U.S.C. § 548(e)(1).
3. Whether the trustee was entitled to summary judgment denying the debtor’s discharge and on alter-ego-type theories related to the trust and associated entities.

## Decision

- The court granted the trustee partial summary judgment on choice of law, trust invalidity as against creditors, and fraudulent transfer avoidance.
- The court held Washington law governed because Washington had the most significant relationship to the parties and trust assets and had a strong public policy against self-settled spendthrift trusts.
- Applying Washington law, the court ruled the trust’s self-settled spendthrift provisions were ineffective against the debtor’s creditors.
- The court held the transfers to the trust were avoidable as actually fraudulent under Washington law and under 11 U.S.C. § 548(e)(1), based on evidence of intent to hinder, delay, or defraud creditors.
- The court did not grant summary judgment on denial of discharge or alter-ego claims, finding material factual disputes requiring further proceedings.

## Legal Principles

- A court may disregard a trust’s choice-of-law clause when another state has the most significant relationship to the trust and parties and applying the chosen law would contravene a strong public policy of the state with the stronger connection.
- Under Washington law, a self-settled spendthrift trust cannot be used to place the settlor’s assets beyond the reach of the settlor’s creditors.
- Transfers to a self-settled trust may be avoided as actually fraudulent when badges of fraud show intent to hinder, delay, or defraud creditors, including transfers of substantial assets without consideration during financial distress, retention of benefits, and close relationships with transferees.
- Under 11 U.S.C. § 548(e)(1), a transfer made within 10 years of bankruptcy to a self-settled trust is avoidable if made with actual intent to hinder, delay, or defraud creditors.
- When transfers to a self-settled trust are avoided and the trust is ineffective against creditors under applicable law, the transferred assets are recoverable for administration as property available to the bankruptcy estate.

## Conclusion

The bankruptcy court applied Washington law despite an Alaska choice-of-law clause, held the self-settled DAPT ineffective against creditors, and avoided the debtor’s transfers into the trust as actually fraudulent under both state law and 11 U.S.C. § 548(e)(1), while leaving discharge and alter-ego issues for later adjudication.


Waldron v. Huber (In re Huber), 493 B.R. 798 (Bankr. W.D. Wash. 2013)