ASSET PROTECTION ISSUE:
Will a Domestic Asset Protection Trust (DAPT) set up in Nevada be effective or respected in a Utah Divorce case?
CASE SUMMARY:
The Dahl’s were involved in an extended and extremely contentious divorce for many years. While this case is getting a fair amount of press about its ‘failure’ as a DAPT case, a closer look reveals that at best this case stands for the idea that a U.S. court cannot be trusted. Whether through failure or mistakes of the parties (which happened in abundance here) or by inexperience or incompetence of the court itself.
The bottom line is that this case was (and is) an absolute mess. The court did not address the Self-Settled Trust issue in any way. The case against the Trust from Mrs. Dahl was NOT joined into the Divorce case itself (which it should have been). And in the end the court accepted Dr. Dahl’s version of the facts due to Mrs. Dahl’s failure to aggressively pursue her claims. The end result is that the trial case basically stands for NOTHING.
By 2015 when the Appellate Court finally rules we do get a little better view. Let’s take a brief look at the timeline first:
- Dahl Family Irrevocable Trust (Established by Dr. Dahl in 2002)
- Marital Assets contributed to the Trust thereafter
- Dr. Dahl Files for Divorce (October 2006)
- 3 years of pretrial proceedings and Discovery ‘rife with abuses’
- 14 Day Bench Trial (September 2009)
- Divorce Court Findings (April 5, 2010)
- Final Divorce Decree (April 20, 2010)
- Appeal Filed by Mrs. Dahl oral argument heard (August 2011)
- Order granting Dr. Dahl’s motion for Summary Judgement affirming trial court (November 1, 2011)
- Appeal to the UTAH Supreme Court was filed thereafter and Appeal Opinion published (January 2015)
TRIAL RESULT:
The TRIAL RESULT was that the court rejected the argument that Mrs. Dahl was a Settlor of the Trust and that the Trust was in actuality ‘Revocable’. The Trust was ultimately EXCLUDED from the marital estate and therefore not considered as part of the estate.
On APPEAL the court granted Dr. Dahl’s motion for summary judgement and AFFIRMED the entire trial courts rulings!
On further APPEAL to the SUPREME COURT of UTAH, the court found in its (77 page) opinion:
- That the Trust contained Marital Property and SHOULD have been joined and considered as part of Divorce case.
- The Court determined that if it were to apply Nevada Law to the Trust (as stated in the Trust) this would violate UTAH public policy – and determined that Utah Law applied!
- Under Utah Law, the Trust was deemed REVOCABLE and Mrs. Dahl was determined to have an enforceable interest.
- The case was remanded for reconsideration of the division of marital assets consistent with the opinion.
LINK TO APPEAL COURT OPINION: https://law.justia.com/cases/utah/supreme-court/2015/20100683.html
ASSET PROTECTION SUMMARY:
From an Asset Protection standpoint, this case has one very big point – You cannot rely on the Trust document or recitals to establish JURISDICTION! In the end the COURT which has the case in front of it, whether State, Federal or Bankruptcy, will determine which law applies, regardless of what the Trust document itself attempts to establish. In this respect the Dahl case follows the Huber Case in its disregard for the stated jurisdiction of the Trust.
TAKE AWAY:
DO NOT USE A DOMESTIC ONLY ASSET PROTECTION TRUST (DAPT)!!! Unless you like the idea of your client’s case taking over 10 YEARS to make it through the system and who knows how much in legal fees. It has become exceedingly clear that doing so gives your clients NO security when it comes to the actual defense of the Trust and the courts continue to show that they will do what they wish to achieve the result they want! Either use a fully Foreign Asset Protection Trust (FAPT), OR use a BRIDGE TRUST ® , which combines the ease of maintenance of a domestic trust with the superior protection of a Foreign Trust.
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