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By The Wyoming LLC Attorney Team

Jun 6, 2022

Delaware Asset Protection Trust

How to Start an LLC


Delaware Asset Protection Trusts offer a secure way to safeguard your assets from creditors, lawsuits, or judgments. They work by placing your assets into an irrevocable trust, protecting them under the control of a trustee. This trust type can be domestic or foreign and comes with various benefits, including privacy and avoiding probate. Delaware is considered a favorable state for asset protection trusts due to its tax benefits.

Trusts can be a wonderful addition to your estate plan when executed properly, and an asset protection trust is one of the best. The asset protection trust allows you to protect your assets from creditors. Whether you have creditors, a lawsuit, or a judgment against you, by placing your assets into a protection trust, they will remain untouched.

How Delaware Asset Protection Trusts Work

If you are looking to protect your assets in an asset protection trust, then it will be irrevocable. An irrevocable asset protection trust essentially means that once you create the trust, it cannot be revoked by changing its terms, and you will never have control over the trust's assets.

After the trust has been created, the assets will be in control of the trustee. The trustee is the person you have put in charge to manage the trust and its assets. Any and all changes will be at the trustee's discretion.

If a creditor files a lawsuit against you, the assets in the trust are not considered to belong to you. Whether or not a creditor wins a judgment against you, there is no chance that the assets will be touched.

The only form of a revocable trust is the revocable asset protection trust. This is also called a revocable living trust, and will not give you the same form of protection as an irrevocable asset protection trust.

Two Types of Asset Protection Trusts

Domestic Asset Protection Trusts

Establishing a domestic trust means that it is done according to the law of the United States, in one specific state. Each state offers different laws that govern asset protection trusts, and forming in the U.S allows stability of federal law.

Setting up an asset protection trust in the United States is usually the most economical option. What is important to understand is that domestic asset protection trusts are somewhat new. This means that the laws governing them are often modified, which may leave your assets vulnerable.

Delaware is often considered a great state to form in. This is because Delaware does not impose a tax on income accumulated for non-Delaware beneficiaries. After a number of years, your beneficiary will have the opportunity to receive tax-free distributions of the untaxed income.

Foreign Asset Protection Trusts

When placing your assets in a foreign asset protection trust, you are creating an account “offshore”. This trust will be governed according to the laws of the country you form in.

Common countries in which foreign trusts are formed include the Cook Islands, Nevis, Caymans, and Seychelles. These countries are usually chosen based on the laws that govern these types of trusts.

Forming a foreign asset protection trust is typically more expensive than doing so in the United States, but often has more stringent privacy measures. This means that your assets may be more protected from court-ordered seizure than if they were in the United States. Offshore APTs also typically do not enforce U.S. judgments against assets of trusts.

Benefits of an Asset Protection Trust

  • Protect assets from lawsuits and creditors
  • Safeguards assets for beneficiaries
  • Privacy
  • Lower taxes
  • Estate planning vehicle
  • Skip the probate process

Funding an Asset Protection Trust

If you are looking to fund an asset protection trust, you can always use cash, but you have a few other options as well.

  • LLCs
  • Real estate
  • Assets
  • Crypto
  • Intellectual property
  • Securities
  • Corporations
  • Business inventory and equipment
  • Aircraft, luxury cars, and boats

Should You Start an Asset Protection Trust in Delaware

If you run a business then an asset protection trust may be something to consider. Not only would this allow you to have protection against personal injury claims, but if you are struggling with creditors, or have high business loans, it can offer protection of your assets as well.

For those with a high net worth, an asset protection trust is almost always a must. Placing your assets in a trust allows you to ensure that your assets are protected from creditors for the sake of your beneficiaries.

An asset protection trust will also allow your heirs to skip the probate process. If you are getting older and want to ensure that your beneficiaries will have access to your assets, then an ATP is the best method of doing so. The probate can be long and costly. This is why an asset protection trust is essential to allow your heirs to skip the process altogether.

How to Get Started

In order to start an APT in the State of Delaware, you will need to create a trust document and then fund the trust. You will need to begin with choosing a trustee, and then naming the beneficiaries. You should also dictate how you prefer the assets to be managed on behalf of them.

Funding depends on the type of assets you wish to place into the trust. It can be smart to establish a limited liability company (LLC) prior to funding the trust. Be sure to understand the tax implications of this type of trust as well.

Establishing an asset protection trust often involves greater complexity compared to other trust structures. We strongly advise consulting with an experienced attorney for guidance in this matter.