A recent court decision is a useful warning for anyone relying on a trust to shield their property. A man set up a Nevada asset protection trust to guard a California home, then watched the IRS reach it anyway. The case shows that these trusts work only when they are built the right way. Get the structure wrong, and a trust can give a false sense of security.
What Happened in the Case
In United States v. Huckaby, decided in 2026, a man and his partner formed a Nevada domestic asset protection trust and moved their South Lake Tahoe property into it. Years later, the IRS won a judgment against him and moved to collect. By then he owed roughly $88,000, and the agency asked the court to foreclose on his share of the home.
As ThinkAdvisor reported on the ruling, the court allowed the IRS to reach his interest in the property despite the trust.
On paper, the setup looked solid. In practice, several missteps undid the protection.
Why the Trust Failed
Three problems combined to sink it:
- The property sat in California, and California does not recognize self-settled asset protection trusts. The court applied the law where the land is located, not where the trust was formed.
- The owner was the settlor, the trustee, and the beneficiary all at once. Because he kept that much control, the court treated the property as still his.
- The creditor was the IRS. Tax liens can reach assets that might be protected from a private creditor.
Each of these is a common mistake, and together they left the property fully exposed.
Situs vs. Trust Law
The ruling turned on a technical point with big consequences. A trust can be written under one state’s law, but for real estate, the law where the property sits usually controls whether a creditor can reach it. Nevada allows self-settled protection trusts. California does not, and the home was in California.
The Lessons for Your Own Plan
You can protect assets with a trust, but the details decide whether it holds up. A few principles stand out:
- Where your property sits matters. A favorable trust state may not control real estate located elsewhere.
- Giving up real control matters. Naming an independent trustee, rather than yourself, strengthens the structure.
- No trust reliably blocks the IRS. Plan for tax debts separately.
- Timing matters. A trust set up before a claim arises is far stronger than one created after.
None of these are exotic. They are the basics that separate a plan that works from one that only looks like it does. Estate Planning Pros builds asset protection that is designed to survive a real challenge, not just look good on paper, with attention to your state’s rules.
If you have a protection plan, or are thinking about one, it is worth a second look. Talk with an attorney about whether your structure would actually hold up if a creditor came calling. An asset protection lawyer can structure a trust that accounts for your state, your assets, and the creditors you actually need to plan for, so it stands up when it is tested.