Ninth Circuit Decision Allows FTC to Directly Levy Trust Assets — A Caution for Asset Protection Planning

On August 4, 2026, the U.S. Court of Appeals for the Ninth Circuit issued a decision that should give pause to anyone relying on  Domestic Asset Protection Trust (DAPT) for asset protection, particularly against federal agency claims. In FTC v. Hoskins, the court held that the Federal Trade Commission (FTC) could execute directly against a Las Vegas residence held in trust to satisfy a $130 million telemarketing-fraud judgment, without first bringing a separate state-law alter-ego action. The ruling represents a significant limitation on traditional asset-protection strategies when the creditor is a federal agency.

The Case

The FTC had obtained a substantial judgment against the debtors. The debtors held a residence in a trust. A Nevada district court blocked the FTC’s collection efforts, citing Nevada’s six-year statute of limitations on judgment enforcement and requiring a separate state-law proceeding to establish that the trust was the debtors’ alter ego.  The FTC appealed.  The Ninth Circuit reversed. 

Key holdings included:

• The Federal Debt Collection Procedures Act (FDCPA) preempts Nevada’s statute of limitations;
• Under the FDCPA, the FTC may levy any property “however held” in which the judgment debtors have a substantial nonexempt interest; and
• Because the debtors were trustees and beneficiaries of the trust, they retained a substantial interest in the residence. No separate alter-ego lawsuit under state law was required.

In short, federal collection procedures overrode state-law protections that asset-protection planners often rely upon.

 Asset Protection Planning Threatened? 

Asset protection planning frequently uses trusts (including irrevocable or discretionary trusts) to create legal separation between an individual and certain assets. State law often protects these trust (or another way to look at it is that these trusts exploit existing state laws) by requiring a creditor to bring an alter-ego, reverse-veil-piercing, or similar action before reaching trust assets. Statutes of limitations can also limit how long a judgment remains enforceable.

FTC v. Hoskins strips away both layers of defense when the creditor is a federal agency enforcing a judgment under the FDCPA. The court treated the debtors’ status as trustees and beneficiaries as sufficient to establish a “substantial nonexempt interest,” allowing direct levy.

This is not a wholesale invalidation of trusts. It is, however, a clear signal that trusts do not provide the same degree of insulation against federal agency collection that they may offer against ordinary private creditors.

Although the decision in the case involved a domestic trust, the reasoning and holding of the case would also apply to offshore trusts.  Its statutory foundation (FDCPA “property however held” and a substantial nonexempt interest) can be applied to interests in overseas trusts. The decision involved a domestic trust holding U.S. real property, however, and the practical obstacles to reaching assets held by an independent trustee in a strong asset-protection jurisdiction remain substantially higher.

For clients concerned about federal agency exposure (FTC, SEC, DOJ, healthcare enforcement, etc.), this reinforces two points:

• Retained interests or control in any trust (domestic or foreign) create vulnerability' and  

• True offshore protection depends far more on the location of the assets and the independence of the foreign trustee than on the formal label of the trust.

As always, outcomes turn on the specific facts, the degree of retained control, the location of the assets, and the willingness of a court to use contempt powers.

This Matters More in Certain Fields

The decision is limited to federal agency collections, but those are precisely the areas where robust asset protection is often most needed. Federal agencies with significant enforcement and collection authority include:

• The Federal Trade Commission (consumer protection and fraud matters);
• The Securities and Exchange Commission (securities and investment-related claims);
• The Department of Justice (various civil and criminal-related recoveries);
• Agencies involved in healthcare enforcement (e.g., matters arising under federal healthcare programs);
• Labor and employment-related federal enforcement; and
• Other financial regulatory bodies.

Professionals and business owners in finance, healthcare services, telemarketing or consumer-facing industries, and other heavily regulated or labor-intensive fields face elevated exposure to federal investigations, civil penalties, and large judgments. In these sectors, the ability of a federal agency to reach trust assets more directly reduces the effectiveness of conventional trust-based planning.

Practical Planning Guide

For clients concerned about potential federal exposure, several points follow:  

• Do Not Assume State-law Barriers Will Hold: Statutes of limitations and alter-ego requirements under state law may be preempted or bypassed when a federal agency collects under the FDCPA.

• Interest in the Trust Matters. Retaining powers as trustee or beneficiary can create the “substantial nonexempt interest” that allows federal levy. More complete separation may be necessary, though complete separation often conflicts with other planning goals (control, tax treatment, or flexibility).  Avoid "comfort clauses."

• Layered Planning Is Paramount:  Trusts are rarely a complete solution on their own. Liability insurance, entity structuring, compliance programs, and careful management of personal guarantees or retained interests continue to play essential roles.

• Jurisdiction and timing matter. This is a Ninth Circuit decision. Other circuits may reach different conclusions, but federal agencies will likely cite it in future collection efforts.

• Early planning is preferable. Once a federal investigation or enforcement action is underway, options narrow significantly. Proactive structuring, while still subject to fraudulent-transfer and other limits, is generally more effective than reactive moves.

 Conclusion

FTC v. Hoskins does not mean asset protection trusts trusts are useless. It does mean that asset-protection strategies built primarily on state-law formalities face a meaningful vulnerability when the creditor is a federal agency armed with the FDCPA. For clients in higher-risk industries, such as  finance, healthcare, consumer services, and similar fields, this decision reinforces the need for realistic expectations and multi-layered planning rather than reliance on any single technique.

As always, the appropriate structure depends on the individual’s circumstances, risk profile, and overall estate and business planning goals. Clients with potential federal exposure should review existing arrangements with counsel familiar with both asset-protection principles and federal collection procedures.

Source: Ninth Circuit decision in FTC v. Hoskins (Aug. 4, 2026), as reported in the Wealth Strategies Journal Daily Update of August 11, 2026.