Asset Protection Trusts

An asset protection trust is a trust in which the settlor creates a trust for his or her own benefit, and includes language that limits access to the assets in the event that a court or creditor is attempting to reach the assets through the clients in their role as beneficiaries. In 1997, Alaska introduced the first asset protection trust legislation. Delaware quickly followed with the act. There are currently eight (8) states with similar legislation that has abolished the rule against self-settled trusts. Alaska was the first US jurisdiction to enact laws allowing protection for self-settled trusts (in 1997) and was shortly followed by Delaware, Nevada, South Dakota, New Hampshire and a few others. The trust can be established as a grantor trust, so that any income earned by the trust is passed directly on to the settlor. If structured properly, the net effect is that the trust assets are permanently preserved for the trust beneficiaries and completely protected from creditors.