Question 11.   What is meant by the term "asset protection trust"? How does a "trust" provide asset protection for myself and my family?

Answer.   As asset protection trust ("APT") is a vehicle created in a debtor-friendly jurisdiction that allows the creator (i.e., Grantor, Settlor, Trustor), contrary to the law in the vast majority of the States, to be one of the beneficiaries. Provided that the transfer of assets does not constitute a fraudulent conveyance, only eight states have enacted various forms of legislation which allow for a trust creator to also be a beneficiary without violating typical discretionary-spendthrift trust rules which prohibit such an arrangement.

However, the amount of asset protection which can be obtained through an asset protection trust depends upon: (a) whether the trust is located in one of these eight states, OR, in a friendly foreign jurisdiction such as the Cook Islands; (b) how well the trust instrument itself is drafted to deal with unexpected events. This depends upon whether the attorney is a specialist in both domestic and foreign debtor-creditor and tax law; (c) who will serve as the Co-Trustees and as the Protector; (d) what type of entity (e.g., LLC, limited partnership, corporation) is established to serve in conjunction with the APT; (e) family, business and financial circumstances and types of assets owned by the creator.