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If you want to transfer your assets to a trust (a) so that your money or other assets are protected from creditors and (b) you nevertheless have access to to those assets, you basically have the following options:
  • Option One is to create a trust that names a trust company located in a state that allows this type of trust. Popular asset protection states are Alaska, Delaware and South Dakota. The major downside of this approach is that you would not be a direct beneficiary. Why? Because a court could decide that this looks too much like you’re trying to hide money from your creditors while continuing to have access to your money. However, it’s still possible to get access to the money in the trust if you need it. For example, the trust could name your spouse as a beneficiary, and you can ask your spouse to request money (and give it to you). The typical trust company charges $1,800 per year.
  • Option Two is to start with a trust company in a foreign country such as Nevis or the Cook Islands. The downside with this is that an foreign trust company charges almost twice as much per year. One Nevis Trust company I work with charges around $3,600 per year.
With Option One (Nevada trust, for example), you are very well protected. If you ever want stronger protection, there is a way to name a new trustee that is located on one of the foreign asset protection jurisdictions such as Nevis or Cook Islands. On the other hand, there are no court cases that say Option One works. On your third hand (is there such a thing?), if almost all potential creditors facing this type of trust have been frustrated to the point where they choose to either settle the dispute or go away altogether, doesn’t this mean that almost every trust of this type has worked?
With Option Two, you are placing your assets outside the reach of any possible creditors. You are essentially taking your chips off the table. There is no way a creditor would ever get access to whatever is in the Nevis trust. As an added benefit, you have the option of setting up a foreign bank account with this approach (if you want to).

In summary, think of it as a “Gold Package” and a “Platinum Package”. They are both good, But Option Two (the Platinum Package, if you will) gives you stronger protection (for a higher annual fee).
Frankly, I think it’s a simple balancing test of cost ($1,800 vs. $3,600 per year) and how protected you want to be.
Paul Deloughery is an estate and probate litigation, and law insurance dispute consultant in Scottsdale, Arizona. Visit his website to read more of his blogs or follow him on Twitter!