United States v. Grant: The Case Where Impossibility Worked

United States v. Grant appears on every list of offshore trust failures. It is also the case that most directly contradicts the argument those lists are making, which is why the details are worth getting right.

The government held a $36 million tax judgment. Two offshore trusts stood between it and the money. A federal court ordered repatriation - and then accepted that the defendant could not comply.

What Happened

The United States sued Arline and Raymond Grant for unpaid income tax, ultimately obtaining a final default judgment of $36 million plus interest. Raymond Grant had previously established two foreign trusts - one in Jersey, one in Bermuda.

When the judgment went unsatisfied, the court ordered Arline Grant either to appoint a trustee in the United States for the two trusts or to repatriate the assets to satisfy the judgment.

She did not repatriate. And here the case departs from the story the failure lists tell: the court initially accepted her position that she could not comply. It examined whether she had the practical ability to compel the foreign trustees, and concluded she did not.

That should be the headline. A federal court, facing a $36 million unpaid tax judgment and an offshore structure standing in the way, ran the impossibility analysis and found genuine inability.

What Changed

Then Arline Grant did something that revealed control.

She made transfers from the offshore trusts to herself, routed through her children's accounts, and used the funds to pay her expenses. The court also identified an unconditional right under the Jersey trust allowing her to withdraw ten percent of the corpus each year - and found, in a footnote, that this was not the same thing as the trust distributing to her for personal maintenance.

Because valid federal tax liens had already attached to those assets, the funds were reachable regardless of what she intended to spend them on. Her diversion of the money into her children's accounts, rather than turning it over, established a scheme to dissipate assets - which justified injunctive relief under 26 U.S.C. § 7402(a). The court ordered her not to reveal the lawsuit to the trustees and to direct money flowing to the United States to the government instead.

The sequence matters more than the outcome. She did not lose because she had an offshore trust. She lost because she demonstrated, by her own transactions, that she could reach it.

Why This Case Is Cited Backwards

Compilations describe Grant as a case where courts issued repatriation orders and contempt findings while foreign trustees refused to surrender assets. That summary inverts the case.

There was a repatriation order. But the court's first ruling on compliance went in her favor - and the coercive relief that followed was triggered by evidence of retained reach, not by the mere existence of a foreign trust. A summary that reports the ending without the sequence loses the only thing the case actually teaches.

It also frequently appears in discussions of Cook Islands trusts. The trusts were in Jersey and Bermuda. No Cook Islands trustee, statute, or court was involved.

We found this pattern - accurate endings attached to inverted reasoning - across multiple circulating case lists, which is why we published our full case-by-case review rather than a summary of our own.

What a Planner Takes From It

• The impossibility defense is alive, and Grant is the cleanest authority for it. A court accepted it on the initial record.
• Post-order conduct is evidence. Every distribution a settlor takes is a data point a court can use to reconstruct control.
• Withdrawal rights are control. An unconditional annual right to ten percent of corpus is not a passive interest.
• Tax liens attach independently. Where valid federal liens have already attached, the destination of the funds does not matter.

The paired case worth reading alongside this one is BB&T v. Hamilton Greens, where the same analysis ran to completion without any finding of control - and the creditor's motion was denied outright.