In re Brooks, 217 B.R. 98 (Bankr. D. Conn. 1998)

Reviewed by Elizabeth A. Tresp, JD, LL.M., trust & probate litigator · Updated August 2026

What the court actually held

• Connecticut law governed despite Bermuda and Jersey choice-of-law clauses.
• Quoting Restatement (Second) of Trusts § 156 cmt. f: “it is not necessary [for a determination that a trust is self-settled] that the beneficiary shall have himself conveyed the property held in trust. It is sufficient that he paid the purchase price for a conveyance upon a trust, of which he is the beneficiary.”
• The evidence “would lead reasonable minds only to the conclusion that Kathryn Frazer Brooks, in transferring the property to the trusts, was loyally following the plan that she and her husband devised, i.e., to remove the stock certificates from the reach of his creditors while providing him with any income from that property.”
• Under Restatement § 156(2), a trust naming the settlor as beneficiary is invalid to the extent of the settlor’s beneficial interest. Trust assets were property of the estate.
• Intent is irrelevant: “The assertion that the debtor and his wife intended to establish spendthrift trusts for tax and estate planning purposes and not to remove his wealth from the reach of creditors is not relevant.”
• Footnote 6 closes the obvious workaround: the court does not read the Restatement to require that the settlor provide 100% of the corpus, because “a scheme whereby another person makes a minimal contribution to the trust corpus should not defeat a state’s public policy against self-settled spendthrift trusts.”

The planning lesson

Substance governs. If the protected person funded it and benefits from it, courts in common-law-rule states will treat it as self-settled no matter whose signature is on the deed of settlement, and no matter how benign the stated purpose. Genuine third-party trusts, funded by a parent or grandparent with their own property, for someone else’s benefit, are a fundamentally different and far stronger structure. The distinction is real, and it is worth building around.

Why this matters for your plan

Reading the cases is not an academic exercise. Every one of these decisions turned on something a planner controls: when the structure was created, how much control the settlor kept, whether the governing-law choice was backed by real contacts, and whether the client told the truth on the record. We build to the way these disputes are actually litigated, because Elizabeth litigates them. To discuss how your situation maps onto this body of law, call (858) 755-6672.