Wyoming is home to beautiful vistas and plenty of natural splendor. But for high-net-worth individuals, it's also one of the handful of US states in which you can set up a domestic asset protection trust.
If you've been looking into ways to safeguard your assets against creditors, lawsuits, and ex-spouses, Wyoming might have come up on your list as one of the best jurisdictions.
In reality, though, Wyoming isn’t the smartest place to set up your asset protection trust. Below, we’ll break down why, plus go over the pros and cons of Wyoming asset protection trusts.
What is a Wyoming Asset Protection Trust?
A Wyoming asset protection trust is, according to state law, a “qualified spendthrift trust.” Let’s break down some key definitions:
- An asset protection trust is a fiduciary arrangement involving a grantor, trustee, and one or more beneficiaries. You place assets in the asset protection trust, thereby giving up your ownership and control of the assets.
If a creditor or lawsuit plaintiff tries to claim those assets, they won’t be able to since you no longer own the assets and can no longer use them to pay for debts or court damages
- A spendthrift trust is a specific type of trust that limits distribution schedules. In most cases, a spendthrift trust is meant to prevent beneficiaries from getting access to the trust’s complete collection of assets all at once (usually to preserve the asset nest egg and avoid irresponsible spending by family members or other beneficiaries).
It essentially regulates beneficiary access to trust assets according to the wishes of the grantor
In Wyoming, a qualified spendthrift asset protection trust is notable for a few major attributes:
- The grantor or settlor of the trust can be the sole beneficiary. This is opposed to states like California, which do not allow you to create asset protection trusts in which you are a beneficiary
- The grantor retained ultimate control and authority over any investments in the trust. They act as an investment advisor, so they can veto or override decisions made by the trustee (the person or firm responsible for managing the assets in the trust)
The Benefits of a Wyoming APT
At first glance, it might seem like a Wyoming asset protection trust is an excellent vehicle for your legal defensive needs. It is true that there are some advantages to setting up a Wyoming domestic APT compared to setting up asset protection trust in other states, such as:
- Wyoming's domestic asset protection trust laws are fairly effective compared to those in other states. Generally, you can insulate your trust's assets from creditors, though there are some exceptions (as we'll go over below)
- Since Wyoming allows you to name yourself as the investment advisor for your trust, you can retain control over investment decisions for trust assets. Some high-net-worth individuals might think this is a benefit, particularly if they are used to being in control (though it is actually a defensive downside)
- Since Wyoming asset protection trusts are based in the US, it's cost-effective for you to set one up. But when you already have millions of dollars you need to protect, is going for a budget-friendly asset protection solution really the wisest idea?
We aren’t saying that there are no possible circumstances where a Wyoming asset protection trust isn’t somewhat valuable. However, we do believe that – in every instance where a Wyoming asset protection trust can be useful – an offshore asset protection trust can be better.
Disadvantages of Wyoming Asset Protection Trusts
Wyoming asset protection trusts have serious downsides you shouldn’t ignore. In fact, these big disadvantages make Wyoming asset protection trusts less than stellar defensive vehicles:
- For starters, child support orders for assets or money are still enforceable against any assets in a Wyoming asset protection trust. Therefore, you can’t use this vehicle to safeguard your assets against this specific hazard
- Furthermore, any assets in the trust specifically included in an application to obtain or maintain credit are vulnerable to creditor claims later. So if you put up a certain amount of money as collateral for a loan, then default on the loan, the creditor can take that money out of your asset protection trust
- Of course, if it can be proven that you made a fraudulent conveyance for transferred assets into the trust to defraud a creditor, you’ll not only have to pay the money to the creditor out of your asset protection trust – you’ll also likely face additional legal fees for breaking the law
On top of that, the biggest downside to a Wyoming asset protection trust is the lack of legal defensibility. Simply put, because a Wyoming trust is in the US, any US court rulings or relevant case precedents are serious threats against the security of your assets.
It’s trivially simple for a motivated lawyer, judge, or creditor to breach the defenses of your asset protection trust based on US APT case precedent. If there’s a will, there’s a way, and that’s doubly true when it comes to people who want to take your money.
Bottom line: you can’t trust a Wyoming asset protection trust to safeguard your assets against all threats, especially serious ones, like creditor claims or lawsuits.
Are Other US Domestic Trusts Similarly Vulnerable?
Yes. By nature of being based in the US, domestic trusts that you set up are vulnerable to creditors, lawsuit plaintiffs, ex-spouses, and everyone in between. At Dominion, we always tell our high-net-worth clients that you can't rely on domestic trusts for asset protection purposes.
It doesn’t matter how well the trust is written, who the trustee is, or what your asset protection plan is overall. When push comes to shove, your domestic asset protection plan will collapse like the house of straw from the Three Little Pigs.
Superior Ways to Safeguard Your Assets
What if you could build a brick house, however? Even better, what about a house of titanium? Turns out, there is a house of titanium for your assets: it’s called an offshore asset protection trust.
An offshore asset protection trust is, by definition, based in a jurisdiction other than the US. It can be any other country that suits your purposes. The key fact is that since the asset protection trust is set up in an offshore jurisdiction, US courts don't have nearly as much power over it and the assets within.
Offshore trusts aren’t illegal by any stretch of the imagination, despite what pop culture might imply. In fact, an offshore trust can be set up to be totally legal and 100% airtight, especially when you work with experts at Dominion.
Offshore asset protection trusts technically safeguard your assets the same way a domestic trust does: it eliminates ownership of the assets, so you can’t be compelled to give those assets up in the event of a legal action.
However, unlike a domestic trust, an offshore asset protection trust isn’t beholden to the rulings or commands of US officers, court judges, and creditors.
A judge can try to get the assets from an offshore trust if they want, but they won’t be successful, provided that your trust is drafted correctly and stored with the right bank.
Even better, offshore asset protection trusts are usually set up with completely neutral third-party trustees. Put another way, you want to know the trustee on a personal or professional level outside of the trust arrangement.
This provides yet another level of legal defense to your fiduciary vehicle. A court can't say that you have any means of influencing the decisions of the trustee to get access to your assets.
Setting Up an Offshore Trust
If you are leery of setting up an offshore trust because of complexity or timeline, don’t be. When you get in touch with Dominion, we can streamline the process for you and break down everything that’s involved.
Lots of high-net-worth individuals are wary of setting up an offshore trust initially because they aren't used to it or because they aren't totally in control. But when you work with partners like Dominion, you'll find that all of those worries fall away in our capable hands.
Speak to a Dominion Representative Today
In summary, even though Wyoming does allow you to set up an asset protection trust, the fact that it’s domestic – and therefore subject to US court rulings and case precedent – means it can’t be relied upon to keep your assets safe, especially against motivated creditors or lawsuit plaintiffs.
You’ll instead be much better off with Dominion. That’s because we’ll set you up with an offshore, highly resilient asset protection trust that isn’t beholden to US court rulings or creditor claims.
In fact, a Dominion-style asset protection trust is akin to a steel vault for any assets you place within, whether that’s liquid capital, real estate, or something else.
Over the years, we've built up a reputation for success and quality of service. Learn why other high-net-worth individuals have trusted Dominion for their asset protection needs by contacting us today.