Why Domestic Asset Protection Trusts Don’t Work

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I wanted to go through the difference between domestic and offshore asset protection. This is intended for Americans or people living in the US, who are thinking of protecting their assets.

Using a domestic trust to protect assets is for the most part a ridiculous way to spend money, because you don’t get any real protection. One thing, there is no real secrecy with these kinds of trusts. If let’s say you have a domestic asset protection trust in Nevada, it’s very easy to get to the trustee, the person who manages your money.

Why Domestic Asset Protection Trusts Dont Work - Infographic

Another thing is those promoting these kinds of services, they forget one important detail. You actually have a constitution in the United States, which includes what’s called the Full Faith and Credit Clause:

Article IV, Section 1:

Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state.

Meaning that every state can enforce federal law in any other state. That’s how simple it is.

The main reason that domestic asset protection trusts exist, is for local, state governments and service providers to collect fees. The legislation of these trusts have never really been tested in court, not in a solid case, no real case history.

Doing asset protection with a domestic US trust, is exactly the same as having an investment strategy that hasn’t been proven. You are more likely to trust a process that has been tested, compered to one with no track record. These legal vehicles haven’t been tested at all.

It’s also just as much work to create a domestic asset protection strategy, as going offshore. Why not instead use a jurisdiction where US judgements can’t be enforced? If you go to a country outside the United States, domestic law doesn’t really apply, and therefore you make it almost impossible for anyone to take your assets.

Instead of having a domestic asset protection trust, you might have one in Belize, Saint Lucia, Bahamas or Cook Islands, it all depends. Everything has to be customized for you, but I just wanted to go through this because there is a lot of confusion about this, and it can really hurt people. If you invest in setting up a domestic structure, and then you figure out if you get in trouble that you weren’t really protected, it sucks to lose your money.

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Fredrik helps high net worth individuals with creating international asset protection strategies. To keep anything from currency, real estate, precious metals and any other kind of investment protected from an unexpected lawsuit.