Offshore trusts or onshore trusts that are self-settled (grantor is also one of the beneficiaries.) These trusts are called "Asset Protection Trusts" because it's obvious that asset protection is the only reason for having such a trust.

We have learned from the courts that if you set up your affairs in such a way so that it is obvious your #1 concern is to evade creditors you have committed the cardinal sin of asset protection, which is:

Never do asset protection

in a way so that it’s obvious

you are only trying to evade creditors.

You may be a bit confused by the above statement. You may be asking yourself, “But, isn’t evading creditors the sole purpose of asset protection?” Well, in a way, it is. (Of course not all creditors will be, or are meant to be, evaded by an asset protection program. We are primarily concerned with litigators and government agencies operating outside of the restrictions imposed by the U.S. Constitution.) BUT, and this is a big but, we don’t want to be obvious that we are doing asset protection for asset protection’s sake. Being obvious about what we are doing is a major no-no.  To see how being too obvious can cause an asset protection plan to fail, let’s go back to examine Brown v. Higashi (In re: Case No. A95-00200, Alaska Bankruptcy Court), which revolved around the use of two irrevocable, self-settled Belize trusts that the Browns used to protect their assets. Now, Belize trusts are widely advertised as being an excellent asset protection tool and, ironically, this advertising is exactly what makes these trusts so lousy at protecting assets. Let me read some excerpts from this case, which will drive home my point:

"The Browns contend that establishment of the Leones Company trust was simply an estate planning device. If estate planning was the only consideration, however, their needs could easily have been addressed through American wills or trusts. Mr. Brown is a shrewd businessman. As such he sought to shield his assets from exposure to creditors through use of friendly foreign jurisdiction.

...

“Alaska statutes specifically provide for the invalidation of fraudulent transfers, including transfers to trusts. A.S. 34.40.010 - 34.40.130. Belize, on the other hand, appears to actively encourage such transactions. It does not even have a fraudulent conveyance law. Rather, trusts in Belize are immune from attack from creditors even when created by fraudulent transfers. Moreover, the trusts can be self-settled.

As noted by one author:

 

C. But Belize is Best.  The Cook Islands adopted at least some version of fraudulent conveyance law; Belize (the former British Honduras) did not even try.’”

...

“The policies underlying the current law of Belize are diametrically opposed to the fundamentals of Alaskan and American fraudulent transfer law. Belize is a popular trust jurisdiction precisely because it allows the types of fraudulent transfers that are unenforceable in America.” [emphasis added]

...

“I find the initial transfer to the Leones Company business trust to be fraudulent and void for several reasons.

The transfer of funds that created the Leones Company was made to hinder, delay or defraud future creditors. The fact that the trusts were established in Belize, a country notorious for its anti-creditor policies, rather than Alaska or Washington, indicates an intent to hinder, delay or defraud on the part of the defendants. Further, one of the express purposes for creation of the trust listed by the trustee was the protection of ‘assets from liability.’ ” [emphasis added]

...

“The Browns retain the ability, as trust officers, to instantly obtain all cash from the Merrill Lynch policies without interference from the trustee. I conclude that the Leones Company trust is simply a sham. The true substance and business of this trust is to avoid creditors and nothing more.” [emphasis added]

...

“The Belizean trusts established and controlled by the Browns were created by fraudulent transfers. As such, the assets of these trusts are property of the bankruptcy estate.”

Hopefully, the above excerpts will convince you that attempting to protect assets  in such a manner is not a good idea.

This is precisely why PF Shield uses LLC’ s, and not offshore trusts, to protect assets. (A judge would not talk about a state’s LLC laws with the same hostility that he used when discussing Belizean trust law.)

Using a self-settled offshore trust to protect assets is like painting a big, wet, dripping bulls-eye on your stomach.

You are surely taunting the judge to do his best to financially devastate you.

We recommend a simple revocable land trust or personal property trust from time to time, but this trust arrangement is only for an extra layer of privacy to be used as a part of an asset protection program. It is never meant to stand up by itself in court as an asset protection device.