An Asset Protection Trust is a legal, United States-based way to protect your family's hard-earned assets and wealth from the financial disaster of judgment and provide bankruptcy asset protection. These wealth protection strategies are popular among doctors, lawyers, celebrities (producer / rap artist Kanye West probably needs one), executives and other moderately-high and high-income individuals. Capricious judges; mis-informed, envious juries and unexpected financial reversals can ravage your life savings.
A domestic Asset Protection Trust, if correctly established in advance by a competent attorney, can provide legal protection for your home, cars, boats and other liquid and non-liquid assets of any dollar value. Note that the testing these trusts (including for bankruptcy asset protection) in U.S. courts to date is limited, so judges have little precedent to help them decide these cases.
An asset protection trust can be established under the laws of eight states. Such a trust is commonly referred to as an Alaska Trust, Delaware Trust or Nevada Trust. Another term is "Self-Settled Spendthrift Trust." They are generally available to residents of any of the United States, although it is unclear how effective they are for out-of-state residents.
These are legal onshore domestic trusts, not sketchy offshore trusts that can raise the ire of the Internal Revenue Service and Homeland Security. This includes corporate officers whose wealth is at risk due to the Sarbanes-Oxley Act (sarbox) and those seeking bankruptcy asset protection in a court.
According to the Wall St. Journal, experts say that Delaware, South Dakota, Alaska and Nevada have the most attractive trust laws, while Florida, New Hampshire and Wyoming are also good places to park an asset protection trust.
These states are reported (in 2010) to permit onshore asset-protection trusts:
You can read about asset protection trusts in an International Herald Tribune article here, including these sentences:
...Money held in asset protection trusts can elude creditors because federal bankruptcy law exempts assets governed by "applicable nonbankruptcy law."...Asset protection trusts have become increasingly popular in recent years among physicians, who fear large medical malpractice awards, and corporate executives, whose assets are at greater peril now because of new laws...While it is difficult to quantify how much money is sitting in domestic asset protection trusts, their popularity is undeniable, bankruptcy experts said. "I've heard figures for foreign asset protection trusts and those probably are in the billions," Adam Hirsch, a law professor at Florida State University, said. "I haven't seen any figures for domestic asset protection trusts, but they could very well be the same."...domestic asset protection trusts can be set up by the same people who plan to benefit from them. In addition, there are no caps on the dollar amount of assets they can hold and no restrictions on their purpose, Marty-Nelson said. One limitation is that the trusts cannot be set up by people who are already insolvent....
Asset protection is the process of arranging one's affairs so as to minimize the risk that one's wealth will be seized, such as by litigants, creditors, or a taxing authority. Asset protection may also be referred to as "wealth retention." Bankruptcy asset protection is a sub-specialty.
What About Protecting the Assets of a Married Couple?
Prosperous families often set up Bypass Trusts, to reduce the size of their taxable estates.
What About Protecting the Assets of a Family Owned Business?
Family businesses should examine whether a Self-Settled Trust is appropriate for their situations.
So-called Pure Trusts are often fraudulent. There are plenty of scams in the asset-protection field. Seek advice from a trusted and knowledgeable advisor on this complex topic.
What if I Have No Assets to Protect?
Well, that does make life simpler, doesn't it. Your best bet may be to read a book like Rich Dad Poor Dad, then find someone in your area who has the Cashflow 101 board game and play it to fully understand the principles in the book. Following the instructions in the book should set you on course to a point where you will decide you need an asset protection trust.
Note: Nothing on this website should be construed as legal or financial advice. Consult your attorney and accountant to learn if an Asset Protection Trust is right for your particular situation. Please email comments to Trump -at- asset-protection-trust.US