Domestic Self-Settled Trusts in Delaware - TrustCo Bank v. Matthews
A recent Delaware case, TrustCo Bank v. Matthews, involved a Delaware self-settled trust created to protect the assets that the Grantor/debtor transferred to the Trust from creditors. The Delaware court agreed that the creditor could not access those Trust assets. This case is significant because not only did the Delaware court agree that the Trust assets were protected from creditors, but the Grantor/debtor of the Trust was a Florida resident. Even though there was a judgment against the Grantor, Delaware law and its protection applied, rather than Florida law.
This provides support for those U.S. citizens desiring to protect assets from creditors without the complexity or cost of offshore asset protection trusts. There has always been a concern that Delaware self-settled trusts (or trusts created in Nevada or Alaska or Virginia or other states where self-settled trusts are allowed) were vulnerable to the claims of creditors if the debtor and the assets did not reside in the state where the trust was created. But the Matthews case provides support for debtors, regardless of their residence.