BOZEMAN OFFICE 406-582-8822 HELENA OFFICE 406-449-4829
GET HELP NOW!

Blog

Which States Allow Asset Protection Trusts?

Posted on April 8th, 2021

If you’ve never heard of an asset protection trust, that’s because this unique, but relatively unknown, trust has only been around since 1997. As its name states, an asset protection trust is one in which you place your assets so as to protect them from invasion by creditors, judgment holders and anyone else, such as a disgruntled former spouse, who might otherwise have a claim on them.

Unfortunately, as an estate planning lawyer from a law firm like Yee Law Group can explain, only the following 16 states authorize domestic asset protection trusts, called DAPTs:

  • Alaska
  • Delaware
  • Hawaii
  • Mississippi
  • Missouri
  • Nevada
  • New Hampshire
  • Ohio
  • Oklahoma
  • Rhode Island
  • South Dakota
  • Tennessee
  • Utah
  • Virginia
  • West Virginia
  • Wyoming

Domestic Options

If you don’t happen to live in one of the states listed above, don’t despair. The benefits offered by an asset protection trust are still available to you. For instance, you could instruct your estate planning lawyer to establish such a trust for you in one of the states that allow DAPTs. Be aware, however, that this can be quite risky. Why? Because it may not hold up in court if challenged.

For example, in California, one of the states that don’t authorize DAPTs, state judges have been known to uphold a California plaintiff’s right to invade your assets if he or she obtains a judgment against you in California. In other words, such judges apply California law when making their rulings, conveniently ignoring the laws of the state in which your asset protection trust is actually located.

Also, be aware that virtually all DAPT states with the exception of Nevada and Ohio have a four-year look-back period. What this means is that if you have not transferred your assets into your DAPT at least four years prior to the filing date of the lawsuit challenging your trust, the judge may hold that your trust runs afoul of the Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act or one of the other fraudulent transfer and conveyance laws.

If you and your estate planning lawyer decide to establish an out-of-state DAPT, the more connections you and your assets have to that state, the more likely it will pass judicial scrutiny. You may want to consider one or more of the following:

  • Buy a vacation home in that state.
  • Buy investment real estate in that state.
  • Locate one of your offices in that state.
  • Visit that state regularly and for extended periods of time.

Offshore Options

If you don’t want to have to navigate the potentially troubled waters of an out-of-state DAPT, your other option is to instruct your estate planning lawyer to establish an asset protection trust for you in another country. Called offshore asset protection trusts (OAPTs), these are quite safe, especially if you choose to establish your trust in the Cook Islands, Nevis or Belize, the three most debtor-friendly nations.

CONTACT US

Fill out the form below to get in touch with our legal team or call Bozeman office at (406) 582-8822 or our Helena office at (406) 449-4829 to talk to someone right away.