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Asset Protection Trust


To get straight to the point, when you look at Offshore vs. Domestic trusts to shield yourself from lawsuits, offshore wins hands down. That is because your friendly neighborhood judge has the right to issue court orders to domestic trustees. That privilege is not granted to members of the local judiciary for offshore trusts. The trustee in the foreign jurisdiction is not obligated to comply.

Domestic vs. Offshore


offshore trust

Establishing an Asset Protection Trust

When the trust is established you decide whether or not you will also be a beneficiary of the trust. There are trust that are not self-settled such as children’s trust. This type of trust is set up for the benefit of your children. Laws are crafted such that neither your creditors nor those of your children can touch trust assets. You may be able to access trust funds through obtaining a loan from the trust. Then there are self-settled trusts where you establish the trust and maintain beneficial interest in the trust.


Over the past 20 years, billions of dollars have been placed inside of offshore trusts. There are some choice foreign jurisdictions that have very favorable self-settled trust laws designed to protect assets. The chief of of these is the Cook Islands.

offshore island

Domestic Trusts

In 1997 Alaska attempted to stop some of the outflow of funds and enacted self-settled trust statutes. Afterwards, Nevada, Delaware and South Dakota followed suit. Nevada and South Dakota are the two standouts with the most favorable statutes. This is mainly because the assets can be shielded in as little as 6 months (in Nevada). So, the trusts protects assets six months from the date of reasonable discovery of transfer of assets into the trust. For example, publish the transfer of assets into the trust in a small local newspaper. Then, the assets are protected half a year later.

Before these statutes went into place the only self-settled spendthrift trusts. A spendthrift trust is one in which the trustee can prevent creditors from taking trust funds. This can also keep a young beneficiary, for example, from wasting the money in the trust or spending it too quickly.


money judgment

Nevada Trust






E. In Nevada, the rights and privileges of a Spendthrift Trust are clearly defined by statute and do not depend on court decisions or interpretations for the validity of the Trust.

F. State of Nevada does not charge registration fees, annual reporting fees or any other recurring fess charged for the Trust to remain valid. In addition, the Trusts are also not required to maintain a Resident Agent in the State of Nevada.

umbrella & cash

Asset Protection Trust Traits

If the one who formed the trust, referred to as the grantor or settlor, is also a trust beneficiary, it can still potentially provide asset protection. That is the case if the following is also true about the trust:

  • It is irrevocable. If it was revocable (changeable), a judge could order the settlor to change the beneficiary to his or her legal opponent.
  • It has a spendthrift clause.

domestic asset protection trust states


  • That the trustee needs to be someone who lives in the state where the trust is regulated. A bank or trust company that is licensed in that state can also use one.

sailing to safety

Offshore Trusts


asset protection trust jurisdictions

However, experienced attorneys will tell you over and over again, not all judges rule according to law. Many rulings are by the judge’s gut feeling about the case. Once a judgment is rendered the judgment creditor can start seizing assets of the debtor even before an appeal is ruled upon. Once assets are seized and you have no resources left to pay an attorney, it may be difficult to find legal counsel to protect and defend you for free during the appeals process.

Bankruptcy Provisions

So, when there is a bankruptcy, which state’s laws apply? If the court rules that Nevada or Delaware law applies because that is where the business or real property is located, the trust will shield the assets from bankruptcy. With modern statutes there is as ten year vesting period for assets in a such a trust before they are not considered part of the bankruptcy estate. The good news is that if such a legal tool is employed properly bankruptcy can be avoided altogether. We have seen many clients avoid a harmful Chapter 7 or Chapter 11 filing. They end up finding it not necessary when their holdings are secured safely in this secure legal tool.

As of this moment in legal time, the results cannot be forecast. Naturally, the judgment creditor will present arguments that support his position. The judge can rule either way. Because of the tremendous advantages offered by the Nevada asset protection trust one thing stands firm: when there are significant resources at stake, the creditor is going to challenge the legitimacy of the trust.

palms painted as globe

However, if the trust is in a foreign jurisdiction such as the Cook Islands and the assets inside the trust are located in a foreign bank account, the properly drafted trust deed has proven itself worthy to shield funds from creditors time and time again. On the other hand, if the assets are located in the US, domestic assets, such as real estate, businesses and personal property, a domestic asset protection trust is one of the best tools available. For domestic real estate, whereas it is more of a privacy tool than one meant to shield assets, a land trust can work quite well to provide for privacy of ownership.

Case Law Example




Offshore vs. Domestic Trusts

Why Domestic Trusts Don’t Work



securing assets

Why Offshore and Not Domestic





offshore tax haven

Why Offshore Trusts Work


