When a Trust Holds the Line.

In a field where the cautionary tales get all the attention, In re CES 2007 Trust is the quieter and more instructive story: a properly built, properly aged Delaware trust doing exactly the job it was designed to do.

We spend a great deal of this Watchtower explaining why improvised, late, control-laden structures collapse. CES 2007 Trust is the photographic negative of those failures. Every feature the courts punish in the failed cases — late funding, retained control, sham administration, direct ownership of the very assets a creditor wants — is absent here. Studied that way, the case is less a court report than a checklist of what disciplined planning looks like.

But candor is the house style, and a candid planner must say the harder thing too. The very same Delaware court that vindicates a DAPT against the right creditor has been equally clear about what a DAPT cannot do against the wrong one. The domestic asset protection trust is powerful inside its own jurisdiction and materially weaker the moment a creditor can litigate somewhere else. To understand CES 2007 Trust honestly, you have to read it next to In re IMO Daniel Kloiber Dynasty Trust — the case where Delaware itself acknowledged the limit. This note holds both.

The structure was settled on its own clear day. In 2007, the grantor — Michigan real-estate developer Craig Schubiner — established the CES 2007 Trust (In re CES 2007 Trust, C.A. No. 2023-0925-SEM (Del. Ch.)), an irrevocable Delaware trust, naming a corporate Delaware fiduciary as trustee. The trust’s assets were not parcels of land held in the grantor’s own name. They were a ninety-percent member interest in Delaware limited liability companies; those LLCs, in turn, held the underlying real estate. The layering matters, and we return to it below.

More than a decade later, the storm arrived. In 2019, a Michigan court entered a judgment of roughly fourteen million dollars against Schubiner in favor of a lender, Can IV Packard Square LLC, arising out of a development financing. The judgment creditor traced the wealth to the Delaware trust and brought a petition in the Delaware Court of Chancery to invalidate the trust — or at least its spendthrift protection — and reach the assets.

The gap between settlement and judgment is the first thing to notice. The trust was funded in 2007. The creditor’s claim matured in 2019. More than a decade separated the planning from the problem. That is what “seasoned” looks like in a real docket, and it is why the fraudulent-transfer theory that sinks so many structures was a non-starter here: there was no creditor on the horizon in 2007 to hinder, delay, or defraud.

The case produced two layers of reasoning, and a careful planner should hold both, because they teach different lessons.

First, a Magistrate in Chancery examined the trust against Delaware’s Qualified Dispositions in Trust Act (12 Del. C. § 3570 et seq.) and found it sound. The trust was irrevocable, it contained an enforceable spendthrift clause, it was administered by a qualified Delaware trustee, and it was governed by Delaware law. It satisfied, in short, the statutory definition of a protected qualified disposition, and the creditor had failed to state a claim that would strip that protection away. The Magistrate also made a structural observation that every planner should underline: because the trust owned LLC interests rather than the underlying real estate, the trust did not own the dirt the creditor actually wanted. The thing the creditor coveted and the thing the trust held were not the same thing.

Second — and this is the part the quick summaries miss — Vice Chancellor Laster, on review, affirmed the dismissal but rested it on a narrower and more fundamental ground: standing. The court concluded that the creditor lacked standing to bring the challenge at all, characterizing the lender as a “classic intermeddler” that had loaned money to Schubiner’s entities, not to the trust, and that therefore could show no connection between the trust and any injury from the transfers. Lacking standing, the creditor deprived the court of the subject-matter jurisdiction needed to reach the merits, rendering the Magistrate’s merits conclusions advisory — though the Vice Chancellor noted that analysis “appears correct.”

There is a planning lesson hiding in that procedural nuance, and it is not a small one. A well-built structure does not merely give you a strong argument on the merits. On the right facts it can deny the creditor standing to reach the merits at all — a wall before the wall. The most durable protection is the kind that ends the fight on a threshold question, before a judge ever weighs the equities of your particular situation.

Strip away the docket and CES 2007 Trust reduces to the same four disciplines this series returns to again and again. Here, each one was present.

It was seasoned. Settled in 2007, attacked over a claim that arose in 2019. By the time the creditor appeared, the transfer was more than a decade old and unimpeachable as a fraudulent conveyance. Delaware’s qualified-disposition regime imposes a limitations window for creditor challenges (12 Del. C. § 3572); a transfer this old sits far outside any plausible attack period for a future creditor. Time is not a passive virtue in asset protection. It is the active ingredient.

It was irrevocable and discretionary. The grantor did not keep a switch to flip when the judgment landed. The trust was irrevocable, and its spendthrift clause was the kind Delaware law will enforce. The creditor could not characterize the arrangement as a revocable arrangement dressed up as a trust.

It was independently administered. A qualified Delaware corporate trustee held and administered the assets. This is the line between a trust and a costume. The failed structures we have written about — offshore arrangements unwound for retained control — all founder on the same rock: the settlor never really let go. Here, a genuine institutional fiduciary stood between the grantor and the corpus.

It was layered through entities. The trust held LLC interests, not real estate. A judgment creditor who wants a building cannot satisfy himself with a membership interest in a company that owns the building, particularly where the charging-order remedy limits what a creditor of a member may reach. The entity layer did real legal work: it changed the thing the trust owned, and so changed what the creditor could ever hope to touch.

Now the harder half. A planner who stops at CES 2007 Trust has read only the half of the story Delaware likes to tell. The other half Delaware told on itself, a decade earlier, in In re IMO Daniel Kloiber Dynasty Trust, 98 A.3d 924 (Del. Ch. 2014).

The setting was a divorce, not a commercial default. Beth Kloiber and Daniel Kloiber were dissolving their marriage in the Kentucky Family Court, which had personal jurisdiction over Daniel. Substantial wealth sat in a Delaware dynasty trust. When the Kentucky court entered status-quo orders touching that wealth, the trustee and a special trustee ran to the Delaware Court of Chancery seeking, in effect, to wall the trust off — to have Delaware declare that Kentucky could not reach in.

Delaware declined. Vice Chancellor Laster — the same jurist who would later dismiss the creditor’s challenge in CES 2007 Trust — refused to enjoin the Kentucky proceeding, observing that the Delaware court’s role “does not include acting as a quasi-appellate court for interlocutory review of divorce proceedings in other jurisdictions,” and that the parties had an adequate remedy in Kentucky’s own courts. More important for planners was why Delaware would not intervene. The trustee had leaned on Delaware’s Qualified Dispositions in Trust Act, which by its terms confers “exclusive jurisdiction” over actions concerning qualified dispositions. The court read that grant for exactly what it is — and is not:

The statute, in other words, sorts business among Delaware’s own courts. It does not, and constitutionally cannot, bar a sister state from hearing a matter and adjudicating rights in the trust’s assets. As the court put it, “Delaware also cannot unilaterally preclude a sister state from hearing claims under its law,” and to attempt it “would not be giving constitutional respect to the judicial proceedings of the sister state” — the very respect the Full Faith and Credit Clause commands. A Delaware trust statute is a Delaware statute. It governs Delaware courts. It does not travel with the assets into a Kentucky courtroom and disarm the judge sitting there.

That is the structural frailty of the DAPT, stated by Delaware itself. The protection is real, but it is situs-bound. It is strongest precisely where CES 2007 Trust was fought — in Delaware’s own courts, on Delaware’s own terms, against a creditor with no better forum. It is weakest where Kloiber was fought — against an adversary who is already in another state’s court, with personal jurisdiction over the right person, free to adjudicate and then to demand that the judgment be honored.

Nor is this a Delaware peculiarity. Alaska’s Supreme Court reached the identical conclusion about Alaska’s own DAPT statute in Toni 1 Trust v. Wacker, 413 P.3d 1199 (Alaska 2018), holding that a state cannot, by writing “exclusive jurisdiction” into its trust act, “unilaterally deprive other state and federal courts of jurisdiction,” because the Full Faith and Credit Clause “does not compel states to follow another state’s statute claiming exclusive jurisdiction.” Two DAPT states, two of the marquee statutes, the same limit. The boast of exclusive jurisdiction is good against Delawareans and Alaskans in Delaware and Alaska. It is not good against the world.

Set the two Delaware cases side by side and the lesson resolves. CES 2007 Trust is the DAPT at its best: an in-state contest, decided in Chancery, where a disciplined and seasoned structure denied an out-of-position creditor even the standing to argue. Kloiber is the DAPT at its limit: an out-of-state forum, a court with personal jurisdiction over the settlor, and a Delaware bench candidly conceding it could not slam the door from afar.

The difference is not the quality of the trust. The Kloiber trust may well have been impeccably drafted. The difference is who the creditor is and where he can stand. Architecture and time win the in-state fight. They do not, by themselves, win the cross-border one.

The cautionary cases teach by showing you the wreck. CES 2007 Trust teaches by showing you the ship that stayed afloat. Kloiber teaches the most useful lesson of all — the honest map of the water. A DAPT survives a fourteen-million-dollar judgment not because Delaware law is magic but because the grantor did four unremarkable things at the right time: he made the trust irrevocable, handed it to an independent trustee, held the assets through entities rather than in his own hand, and did all of it long before anyone imagined the judgment. That discipline is necessary, and on home ground it is often sufficient.

But it is bounded by geography in a way the marketing rarely admits. A domestic asset protection trust draws its strength from a single state’s statute, and a single state’s statute reaches exactly as far as that state’s courts and no farther. Where the creditor is local, the dispute is local, and the merits will be decided in the trust’s home court — the CES 2007 Trust fact pattern — the DAPT is a genuinely strong instrument. Where the creditor can litigate elsewhere, take a judgment in a forum that has personal jurisdiction over your client, and then invoke Full Faith and Credit — the Kloiber and Toni 1 fact pattern — the DAPT’s home-state exclusivity is a wall the rival court is free to walk around.

This is why Lighthouse’s view of the DAPT is admiring but unsentimental. It is a useful tool, properly situated. For a client whose exposure is domestic and whose likely adversaries will end up in the trust’s own jurisdiction, a well-seasoned DAPT may be exactly right. For a client with genuine cross-border exposure — foreign counterparties, multi-state operations, a spouse or partner who can file anywhere — the harder cases call for a structure that does not depend on one state’s courts honoring one state’s statute. That is the case for a properly seasoned foreign asset protection trust (FAPT) in a jurisdiction engineered to refuse recognition of the foreign judgment and to force the creditor to start over locally under deliberately punishing rules — the very wall the DAPT, by Delaware’s own admission, cannot build.

The time to build is on the clear day; CES 2007 Trust is the receipt for that. And the time to choose the right situs is the same clear day; Kloiber is the reason it matters which one you pick.