There are various asset protection trusts‚ but two common trusts are the Domestic Asset Protection Trust (DAPT) and the Offshore Asset Protection Trust.
A DAPT is an irrevocable trust that is set up under the laws of a state that specifically provides for the creation of a trust with asset protection qualities. Different states have different‚ and thus some more favorable and some less favorable‚ laws regarding DAPTs. Fortunately‚ one does not need to be a resident of a certain state to have a DAPT that is formed under the most favorable state's laws. As a result of legal uncertainties that surround DAPTs in certain jurisdictions‚ potential creditors will have to expend significant litigation expenses to find out whether they can penetrate your DAPT. While this is ample deterrence in itself‚ to ensure the maximum asset protection that is sought a stronger option may be an Offshore Asset Protection Trust.
An Offshore Asset Protection Trust resembles a typical U.S. Trust‚ however ideally the assets are no longer subject to any state jurisdiction‚ but rather the jurisdiction of a foreign country. Foreign jurisdictions‚ such as the Cook Islands‚ provide exceptional legal protection for your assets‚ however for the most protection‚ all control of the offshore trust may need to be relinquished by the person creating the trust.