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Sudden Wealth Blog

Trusts for Asset Protection

Castle on lake. Trusts for asset protection.

Trusts for asset protection are legal tools used to protect valuable assets. They can protect real estate, investments, personal property and just about anything else. By creating a trust and transferring ownership of your assets to the trust, you can protect them from creditors and possible lawsuits.

But be careful. Some trusts work, and others don’t.

First, what is a Trust?

A trust is an agreement between you (the asset owner) and a trustee. With a standard revocable living trust, you name yourself as trustee. However, for trusts set up for asset protection, you normally name someone else to be trustee. The trustee is responsible for managing the trust’s assets according to your wishes as spelled out in the trust document that you create.

Different types of trusts serve different purposes. Some trusts are set up with the intention of protecting assets from creditors and possible lawsuits. Others are primarily set up to manage assets during a person’s lifetime and then transfer the assets to named beneficiaries without having to go through probate court.

What is a Domestic Asset Protection Trust?

A Domestic Asset Protection Trust (DAPT) is a type of trust established in the United States that promises to provide asset protection. However, they are only permitted by a minority of states. In the majority of states (like Arizona), they are not allowed. As a result, if you happen to get sued in one of the majority of states, your trust will not protect your assets. We explain more about asset protection trusts in this post.

What is a Foreign Asset Protection Trust?

A Foreign Asset Protection Trust (FAPT) is similar to a DAPT, but is established in a foreign country. This type of trust also promises to provide protection from creditors and lawsuits. The promoters of these trusts tout how foreign jurisdictions typically have more rigid enforcement rules against creditor claims. A U.S. creditor would have to first get a judgment here in the U.S. Then during the post-judgment collection stage, they would discover that your assets are actually somewhere else in the world. That would then require the creditor to start a whole new legal action in some remote island country somewhere. And by then, the statute of limitations has expired.

Unfortunately, they are not a good way to protect U.S. assets … unless you’re ready to permanently move outside the country. Here’s a list of dozens of cases defeating Foreign Asset Protection Trusts.

What is a Bridge Trust?

A bridge trust is a hybrid structure between a revocable and irrevocable trust that allows the grantor to control the disposition of assets in the trust. This type of trust may be used when an individual wants access to assets during their lifetime, such as medical bills or property, while having the protection of an irrevocable trust. Bridge trusts promise to provide asset protection against creditors.

To learn more about Bridge Trusts, read our post about them.

What is a Special Power of Appointment Trust?

A Special Power of Appointment Trust is an irrevocable trust that has been used for generations to successfully protect people’s assets. There are NO cases defeating them. Their name refers to the fact that the grantor can easily unwind it by specifying who may receive the assets in the trust through an instrument called a “power of appointment.” This power provides the option to give or “appoint” these assets to individuals, charities, or other legal entities as established in the trust document during their lifetime. The chosen beneficiaries will then gain access to these assets per the conditions specified by the grantor.

Our version of the Special Power of Appointment Trust is called an Asset Vault Trust.

Do You Want Proven, Effective Asset Protection?

We use solutions that simply work. They may not sound “sexy” like Bridge Trusts or Asset Protection Trust. However, unlike those products, what we do actually works. Give us a call at 602-443-4888. Let’s get you protected!



Founding attorney Paul Deloughery has been an attorney since 1998, became a Certified Family Wealth Advisor. He is also the founder of Sudden Wealth Protection Law.