What Other Areas of Law Should an Estate Planning Attorney Be Familiar With Before Practicing Asset Protection Planning?
If you are a legal, medical or other high-income professional, or if you have accumulated substantial wealth through savvy investments, you would do well to engage in asset protection planning in addition to other types of estate planning. Why? Because you’re at high risk for targeting by creditors and disgruntled clients who believe they can benefit from your perceived “deep pockets.” As its name implies, an asset protection trust can protect your personal assets from both creditors and judgment holders. It also may help shield you from state income taxes and other “losses.”
As you might expect, however, asset protection planning can become very sophisticated and complicated very quickly. Consequently, the estate planning attorney you engage for this type of help should not only have extensive general estate planning knowledge, but also have more than a passing acquaintance with the following types of law:
- Taxation law
- Business law
- Bankruptcy law
- Debtor/creditor law
- Fraudulent transfer/conveyance law, especially the Uniform Fraudulent Transfer Act and the Uniform Fraudulent Conveyance Act
Which States Allow Asset Protection Trusts?
Unfortunately, asset protection trusts are a fairly new phenomenon, and only the following states allow domestic asset protection trusts:
- New Hampshire
- Rhode Island
- South Dakota
If you live in one of the other states and wish to create an asset protection trust, you have two options: try to establish one in a state that allows it or establish an offshore asset protection trust. Should you choose this second option, your attorney will need to be familiar with international law and which jurisdictions, such as Nevus and the Cook Islands, offer the most extensive protection for debtors and high-risk professionals.
While offshore asset protection trusts are generally legal in the U.S., they’re even more complicated to construct than a domestic asset protection trust because you and your attorney need to make yours comply with the laws of whatever jurisdiction you’re working with. In other words, they’re not for the faint of heart.
Your Trust’s Irrevocable Nature
Wherever you establish your asset protection trust, it’s irrevocable. This means that once you transfer your assets into it, they remain there “forever.” You can’t later reclaim them personally or change or revoke your trust. This serves as yet another reason why you, and especially the estate planning attorney you retain, know exactly what you’re doing before you do it.