Friday, May 31, 2013
A few state legislatures have constructed asset protection
trust statutes that permit a grantor to create a trust that is shielded from
the grantor’s creditors even though the grantor is be a beneficiary.The states with these statues include Nevada, Alaska, and Delaware. For
people not living in those states the creation of a trust
will probably not be effective for asset protection. One possible loophole is the Full Faith and Credit
Clause. This may allow for the enforcement of a judgment against the trust
assets in another state. The Restatement 2nd has a Conflict of Laws provision which indicates that so long as there is a substantial relation to the trust the law
of that state can be upheld. Where the trust was created provides a substantial
relation sufficient to use that location’s law.
See Charles Rubin, A Not So Good Domestic Asset Protection Trust Case, Rubin On Tax, May 23, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.