I use a lot of asset protection trusts. I find them to be an effective and very efficient tool to destroy the economic incentive to litigate. I believe that the U.S. is plagued by an out of control tort system. We have contingency litigators looking for anybody with reachable wealth. And by making it very, very expensive, next to impossible, to reach that protected wealth, you destroy the economic incentive for the, what I call, professional protectors, who are nothing but contingency litigators, you destroy their economic incentive to litigate.

An asset protection trust is a simple device. Basically, it’s any trust utilized to insulate assets from creditor attack. They can take many forms. It’s normally established in an offshore jurisdiction. Although the assets will, most often, remain in the U.S., under the direct or indirect control of the person establishing the trust, that’s normally you, the client. Even though these trusts are foreign for debtor/creditor purposes, we normally structure them so they are domestic for tax purposes, and normally they will not require any special tax reporting. They also won’t save you any taxes. Watch out if someone says they will, you’re probably in the hands of a scammer. Asset protection trusts will not save taxes.

An asset protection trust is normally structured so that the undistributed assets are returned to the settlor, that’s you, the client, when the trust is terminated. The bottom line is a properly done asset protection trust keeps the assets out of the hands of your creditors, but in your indirect control. It is a hugely effective tool to settle or discourage litigation, it helps keep the ownership of assets confidential, it’s a fabulous alternative to pre-nuptial agreements, and it’s something that everybody who any has assets that are exposed to creditor attack should seriously consider.

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