what is an asset protection trust

What is an Asset Protection Trust?

An asset protection trust is a type of trust that is designed to shield an individual’s assets from creditors and legal judgments. These trusts are often established in jurisdictions with favorable legal protections, where the trust’s assets are managed by an independent trustee who has discretion over the distribution of trust funds to beneficiaries. Nevada is certainly one of those jurisdictions.

Asset protection trusts can be domestic or offshore, with the latter generally offering stronger protection due to more stringent privacy laws and obstacles for creditors. They are used to deter litigation, provide negotiation leverage in settlement discussions, and offer peace of mind by securing a portion of an individual’s wealth against potential future claims.

Pros and Cons of an Asset Protection Trust:


  • Creditor Protection: They offer robust defense against future creditors or legal judgments, particularly if established in jurisdictions with strong asset protection laws.
  • Estate Planning: These trusts can be an integral part of estate planning, allowing for the transfer of wealth while potentially avoiding probate and estate taxes.
  • Financial Privacy: Asset protection trusts, especially offshore ones, can provide a higher level of financial privacy for the assets and individuals involved.
  • Litigation Deterrent: The existence of an asset protection trust can deter potential litigation by making it more difficult and expensive for creditors to access the assets.


  • Complexity and Cost: Setting up and maintaining these trusts can be complex and expensive, requiring expert legal counsel and sometimes international coordination.
  • Irrevocability: Many asset protection trusts are irrevocable, meaning once they are established and funded, the terms are difficult or impossible to change.
  • Legal Challenges: The effectiveness of an asset protection trust can be subject to legal challenges, particularly if it is perceived to have been set up to defraud creditors.
  • Tax Compliance: There are stringent tax compliance and reporting requirements, especially for offshore trusts, which can be burdensome and carry penalties if not followed correctly.

Is an Asset Protection Trust Right for you?

Whether an asset protection trust is right for you hinges on a range of personal factors and financial goals:

  • Risk Exposure: If you work in a profession with a high risk of litigation, such as medicine or real estate development, an asset protection trust can offer a safeguard against potential future claims.

  • Asset Size and Type: For individuals with significant assets, especially those that can be easily targeted by creditors, an asset protection trust may provide valuable security.

  • Desire for Privacy: If maintaining privacy over personal assets is a priority, the confidentiality offered by asset protection trusts, particularly offshore ones, can be appealing.

  • Estate Planning: As part of a comprehensive estate plan, an asset protection trust can help in the efficient transfer of wealth to future generations while potentially avoiding probate.

  • Financial Stability: It’s crucial that your financial stability is not compromised by transferring assets into the trust, as these assets may become difficult to access if your circumstances change.

  • Tax Considerations: You need to be comfortable with the tax reporting and compliance requirements associated with these trusts, which can be complex.

  • Legal Timing: Asset protection trusts must be established before there is an issue with creditors. If a claim or lawsuit is already anticipated or pending, transferring assets into a trust could be deemed fraudulent conveyance.

  • Jurisdictional Laws: The laws of the state or country where the trust is established can significantly impact the effectiveness of an asset protection trust.

  • Long-Term Financial Goals: Consider how an asset protection trust fits into your long-term financial goals and whether it aligns with your investment strategies and retirement planning.


What is an asset protection trust?
An asset protection trust is a legal structure designed to protect an individual’s assets from creditors, lawsuits, and judgments by placing the assets out of reach within a trust.

How does an asset protection trust work?
Assets are transferred to the trust, which is managed by an independent trustee. The trustee has the discretion to make distributions to beneficiaries, which does not include the person who established the trust, thus protecting the assets from creditors.

Who can set up an asset protection trust?
Any individual seeking to protect their assets from potential future legal claims can set up an asset protection trust, but it’s particularly popular among professionals with a high risk of litigation.

Where are asset protection trusts established?
They can be established domestically in certain states that provide for such trusts, or offshore in jurisdictions with strong asset protection laws.

What assets can be placed in an asset protection trust?
Almost any asset can be placed in an asset protection trust, including cash, investments, real estate, and other personal property.

Are asset protection trusts legal?
Yes, they are legal, but they must be structured and operated in compliance with both the laws of the jurisdiction in which they are established and the laws of the jurisdiction where the grantor lives.

Can I access the assets in an asset protection trust?
Typically, the grantor cannot directly access the assets; distributions are at the discretion of the trustee based on the terms of the trust.

What is the difference between a domestic and an offshore asset protection trust?
Domestic asset protection trusts are governed by U.S. state law and may be subject to U.S. court jurisdiction, whereas offshore trusts are subject to the laws of the country in which they are established, often providing stronger protection against domestic legal actions.

Are asset protection trusts expensive to set up?
The cost can vary widely based on complexity, jurisdiction, and the professional fees of attorneys or firms specializing in such trusts.

How do asset protection trusts impact taxes?
Asset protection trusts may have tax reporting requirements and implications for both income and estate taxes, and the trust’s structure can influence its tax treatment. It’s important to consult with a tax professional for guidance tailored to the specific trust arrangement.

Contact Battlefront Legal

Christopher R. Harrison, Esq is a registered attorney in the state of Nevada who stands out as a highly creative trust attorney who is dedicated to tailoring a trust that perfectly aligns with your unique requirements. His approach to estate planning is both innovative and client-focused, ensuring that your trust is crafted to serve your needs effectively. 

If you’re looking to establish a trust that is as unique as your estate, reach out to Christopher Harrison. Call him today at (775) 539-0000 or click here to start the conversation about securing your legacy.