Asset Protection - Proprietary Irrevocable Spendthrift Trust

[Kat Hughes]

Hi! 

I recently went to a RE conference and there was a company there called Platinum Trust Group (platinumtrustgroup. com) that told us about proprietary irrevocable spendthrift trust.  Basically, they're saying that this is the best and most full proof way of protecting your assets.  I said I have an umbrella insurance already as well as a living trust and they said that those are still very penetrable but what they have is absolutely not penetrable mainly because it is a third party entity and not tied to your social security.  And also that it has amazing tax advantages... whatever property you have in the trust, if you sell it, you don't incur capital gain tax on it and you also don't have to do 1031 exchange.  

Just wondering if anyone has had experience using this trust or familiar with this company.

[Brian Bradley]

@Kat Hughes If your intent is protection, and you have a HNW to protect, $1MM net worth or more, don't mess around with purely DAPT. Stick with the world gold standard in a Cook Islands Asset Protection Trust or the hybrid Domestic Component Bridge Trust if you don't have a reason to go purely offshore by using a connecting "migration" clause. 

This gives you the best of both worlds, the flexibility and ease of a DAPT with the power and strength of the Cook Islands if and when you need it. They are Irrevocable Self Settled Grantor Trusts. 

You are basically creating a FAPT and creating a bridge back domestically. The trust is anchored as both, and classified domestically by maintaining IRS compliance with USC section 7701. 

Anything purely domestically like a NV Asset Protection Trust can never get away from a judges actual authority or the US Constitution Full Faith and Credit Clause. DAPT work for the residents of those States. So for example, if you are a CA resident and you use an out-of-state NV asset protection trust, it really will not do you any good. A recent case Kilker vs Stillman (2012) dropped the hammer on this. This was a case where a CA resident created a NV Asset Protection Trust. 4 years later he was sued. The court discarded the choice of law clause since not a resident of NV and applied a 10 year look back, and also created a new legal standard called "reasonably foreseeable creditors." This is the case docket. https://www.leagle.com/decision/incaco20121126043 This case was then upheld in the court of appeals. And even those residents of states that have established Self Settled Spendthrift Asset Protection Trust legislation are piercing them. Look at Battley vs Mortensen (2011). Case docket here. http://www.akb.uscourts.gov/op...

Judges can do whatever they want. Its the sad fact of our modern legal system.