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• Self-settled asset protection trust can’t shield real property in other states—In United States v. Huckaby (No. 2:23-cv-00587, March 2, 2026), the California District Court considered the question of whether the Internal Revenue Service could reach real property held in a trust to satisfy a federal tax lien, ultimately concluding that the real property was accessible to satisfy the lien.
The real property in question was located in California, while the trust was established in Nevada. Robert and Judith Huckaby were the settlors, trustees and beneficiaries of the trust. Notably, no Nevada trust company served as trustee.
The Huckabys asserted that Nevada law should apply and that, under Nevada law, the lien couldn’t be attached to the real estate held within it. The court rejected this argument, concluding that the real property’s location, not the trust’s situs, determines which law applies. Therefore, California law applied.
Under California law, assets can’t be shielded from creditors by placing them in a self-settled trust. Because the taxpayers were both settlors and beneficiaries, from a creditor’s perspective, it’s as if the taxpayers owned the property outright.
Since California applied to the California property, the court concluded that the IRS lien properly attached to the taxpayers’ interest in the real property, despite being held in a Nevada trust. This case shows there are significant limitations of self-settled asset protection trusts when it comes to real estate. It’s interesting to consider whether the outcome in this case would have been different if the trust had owned the property through a limited liability company or if the trustee had been located in Nevada rather than California.
• Private Letter Ruling approves division and termination of charitable remainder unitrust (CRUT)—In PLR 202601002 (Jan. 2, 2026), a married couple sought to divide a CRUT to make a current gift to charity. They had established a CRUT under which they retained a unitrust interest for their joint lives. The CRUT gave them a limited power of appointment exercisable by will or by other instrument to designate the qualified charitable remaindermen. If they didn’t exercise the power of appointment, the balance of the CRUT would be distributed to two named charities on the death of the survivor of the couple.
A few years after establishing the CRUT, the couple’s foundations were facing budget issues, and they wanted to explore options to transfer more assets to the foundations currently, rather than waiting until their deaths.
Ultimately, they decided to divide the CRUT into two identical CRUTs (A and B). The trustees will allocate $X to Trust B and the balance to Trust A.
They represented that the assets allocated to Trust A and Trust B will be fairly representative of the aggregate adjusted bases of the trust assets and that the division of the assets between Trust A and Trust B will be on a pro rata basis with respect to each major class of investments held at the date of the division, and within each class, will be fairly representative of the overall appreciation or depreciation of the assets therein.
In accordance with Article II of the trust, the couple irrevocably designated Foundation 1, Foundation 2 and Charity as beneficiaries of specific percentages of the remainder of Trust B. They then successfully petitioned the local state court to approve the trust division and partial termination of Trust B, so that they assigned their respective unitrust interests in CRUT B to the charitable remaindermen, including the foundations.
The IRS approved the transaction and held that there was no self-dealing between the taxpayers and the CRUT or the foundations because the division wasn’t a sale or exchange, and the taxpayers received no benefits or additional assets by reason of the division. Further, the couple paid all legal costs related to the transaction. In addition, the taxpayers were entitled to a charitable contribution deduction for their gift of their unitrust interest and a gift tax deduction for the actuarial value of those interests.
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