July 2, 2018
Trusts & Estates Magazine
A recent decision allows Montana fraudulent transfer finding to affect protections of a self-settled trust.
Section 34.40.110(k) of the Alaska Trust Act purports to grant Alaska courts exclusive jurisdiction over an action brought to avoid, as a fraudulent transfer, a transfer of property to an Alaska self-settled spendthrift trust.1 At its core, the statute provides that “[a] court of this state has exclusive jurisdiction over an action brought under a cause of action or claim for relief that is based on a transfer of property to a trust that is the subject of this section.”2 On March 2, 2018, however, in Toni 1 Trust v. Wacker,3 the Alaska Supreme Court ruled such provision invalid stating, “…the Alaska legislature’s purpose in enacting that statute was to prevent other state and federal courts from exercising subject matter jurisdiction over fraudulent transfer actions against such trusts…We conclude that it cannot.”4
Let’s examine the Toni 1 Trust decision and the court’s analysis concerning why the Alaska legislature can’t usurp subject matter jurisdiction through the enactment of AS Section 34.40.110(k). More importantly, however, let’s also examine the implications of the Toni 1 Trust decision as they relate to the typical situation involving an out-of-state settlor and the effectiveness of his self-settled spendthrift trust for estate and asset protection planning purposes.5
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