On June 19, 2012, the Superior Court for the State of California for the County of Los Angeles sustained our motion to dismiss a lawsuit by Wilmington Capital LLC against The Big Whale Trust (a 541 Trust™ created by McCullough Sparks).
The grantor had funded the trust with cash and real estate prior to the time the liability was incurrred. The grantor’s spouse and children were the trustees and beneficiaries of the trust. The trustees had made several distributions to the grantor’s spouse, but the grantor was not a beneficiary and the grantor had personally received no benefits from the trust.
Wilmington Capital LLC sued the trust because it had been unable to collect against the grantor and the grantor’s spouse. Wilmington Capital LLC had no evidence to claim that the trust was invalid, that the transfers to the trust were fraudulent, or that the grantor was the alter ego of the trust. Wilmington Capital LLC argued that they should have access to the trust because the grantor had retained a special power of appointment over the trust.
Because California law protects the assets of an irrevocable non self-settled discretionary trust (even when the grantor retains a special power of appointment), our client was able to have the case summarily dismissed without incurring significant legal fees.
The Big Whale Trust is a perfect illustration of the best way to create, fund and operate an asset protection trust. Copies of the court pleadings (including our Memorandum of Points and Authorities) are available upon request.