BMF Partner Barbara Snapp Danberg, who leads the firm’s Estates & Trusts practice, was recently invited by Denise Nordheimer of Fox Rothschild to speak at the firm’s monthly peer group meeting of Taxation and Wealth Planning attorneys. Barbara presented on the CES 2007 Trust litigation, a Delaware Court of Chancery matter in which a creditor’s challenge to a Delaware Asset Protection Trust (DAPT) was dismissed.
The case began after a Michigan lender obtained a roughly $14 million judgment against the trust’s grantor and then pursued the trust in Delaware, alleging it was a sham and that the grantor and trustees improperly controlled or administered it. Delaware Court of Chancery Magistrate Selena Molina found that the trust met Delaware’s statutory requirements and that the LLCs held by the trust should be treated as separate entities. Vice Chancellor Laster ultimately dismissed the case, finding that the creditor lacked standing because it could not show an injury caused by the trust.
Using her firsthand experience litigating the matter, Barbara walked through the claims and defense strategy, the magistrate’s report and subsequent exceptions, and comparisons with Kulp v. Timmons. She also discussed the implications for DAPTs, including the importance of qualified trustee administration, support for adviser and trust protector structures, and the challenges creditors face in pursuing collateral attacks. She closed with practical recommendations for trust formation and fiduciary defense, emphasizing standing as a potentially powerful defense.
This presentation reflects BMF’s commitment to staying at the forefront of developments in Delaware trust law and sharing practical insights with fellow practitioners. Opportunities to collaborate with firms like Fox Rothschild help foster dialogue within Delaware’s trusts and estates community and advance thoughtful approaches to structuring, administering, and defending trusts effectively.