$0 Spent on a Nevada Trustee Cost Him the Lake House

A man named Robert Huckaby had a one-half interest in a parcel of land in South Lake Tahoe, California. He and his co-owner, Joyce Tritsch, put it inside a Nevada trust called the Circle H Bar. The trust had a spendthrift clause. It had a choice-of-law provision pointing to Nevada. It had everything the brochure promised.

The IRS wanted the house. The trust folded like a napkin.

A federal court in California authorized foreclosure on Huckaby's interest in the property earlier this year. The Circle H Bar didn't slow the IRS down for a single afternoon. And the reasons it failed are sitting inside most off-the-shelf Nevada asset protection trusts right now.

Three kill switches. Let me trace the pipes.

The house sat on California soil. That's the whole problem.

There's an old rule. Real estate follows the law of the state where it sits. Not the state on the trust document. The state where the dirt is. Courts call it the situs rule, from the Restatement (Second) of Conflict of Laws §280.

Huckaby's trust said "Nevada." The house said "California." California won. The Nevada wrapper did nothing.

Look, this isn't a California quirk. The situs rule is nationwide. Your Wyoming trust holding a rental in Alabama? Same exposure. Your South Dakota dynasty trust holding a condo in New York? Same exposure. The dirt doesn't read your trust document.

Huckaby and Tritsch created the trust. They ran the trust. They ate from the trust. They were the settlors, the trustees, and the beneficiaries. (All three roles. Same two people.)

California has a statute for this. Probate Code §15304(a) says: you built the trust and you benefit from it, so the spendthrift clause is dead. Creditors walk right through.

I mean, think about it in physical terms. You put your house in a safe. You kept the key. You kept the combination. You kept living in the house. Then you told the IRS they couldn't touch it because it was "in the safe."

The court did not find this persuasive.

This one's the kicker. Nevada wrote its own asset protection trust statute. And Nevada's own statute has a rule most people skip past.

NRS 166.015(2) says if the settlor is also a beneficiary, at least one trustee must be in Nevada. A Nevada resident. Or a Nevada trust company. Or a Nevada bank with trust powers. Pick one.

Huckaby never hired one. WealthManagement.com put it plainly:

Right.

He picked Nevada's rules. Then he didn't follow Nevada's rules. The trust failed the test of its own home state.

Every trust attorney points at the choice-of-law clause. "It says Nevada law governs." The Huckaby court skipped past it. The situs rule ate it. The self-settled doctrine ate it. The missing trustee ate it.

A choice-of-law clause is a suggestion. Not a command.

Pull your trust document out of the drawer.

One. Does the trust hold real estate in a state that isn't the trust's home state? If yes, that property follows the law of the state it sits in. Not the state on the cover page.

Two. Are you the settlor and the beneficiary and the trustee? If yes, you're the man in the mirror. The trust is just you wearing a hat.

Three. Does the trust have an independent trustee who lives in the trust's home state? If not, you might be failing the rules of the state whose protection you're counting on.

Huckaby tripped all three. The Circle H Bar had a Nevada address, a spendthrift clause, and a choice-of-law provision. It had everything except the three things that matter.

One more thing. Some attorneys are now asking whether the result changes if Huckaby and Tritsch had held the Tahoe property inside an LLC instead of dropping it straight into the trust. The trust would own the LLC interest, which is personal property, instead of owning California real estate governed by the situs rule. That question is still open. But it's a question worth putting to your attorney before the IRS puts it to a judge.