Estate Planning and Tax Lawyer Blog

An asset protection trust protects your assets against creditor attack, and there are a number of different methods to protect different categories of assets.

Typically, asset protection trusts are used 1) to keep asset ownership confidential, 2) to discourage litigation, 3) to protect otherwise unprotectable assets, 4) as an alternative to a pre-nuptial agreement, and 5) as a way to diversify investment.

An asset protection trust is usually established outside the U.S., although the assets themselves will normally remain in the U.S. under the indirect control of the person who has established the trust.

An asset protection trust is generally irrevocable for a set period of time.  Once that time period has elapsed, the assets are returned to the owner of the trust or their heirs.

Recently, several states have enacted asset protection legislation in an effort to compete with offshore trusts.  These include Alaska, Delaware, Nevada, Utah and Rhode Island.  However, since the legislation is so recent, the courts have not yet tested the true scope of this protection, so domestic asset protection trusts should be considered with that in mind.