continued Entrepreneurs: Individuals considering entering into a high-risk business venture often move some or all of their net worth into a domestic asset protection trust. This protects some of their assets against potential liability arising from high-risk business ventures before entering into them. In addition, entrepreneurs who spend years building a business and eventually sell the business may be concerned about potential liability from purchasers or others. In fact, following a liquidity event, many entrepreneurs take a portion of the sale proceeds and place them in a domestic asset protection trust.
Vulnerable people: The elderly, the disabled and young adults who are or may become mentally, physically or financially impaired may consider establishing a domestic asset protection trust to avoid assets being diminished against their will.
Those who receive gifts, inheritances or a marital estate: Particularly for those in high-risk professions or business ventures, individuals who receive gifts or inheritances may want protection against future creditors’ claims. Similarly, individuals who are planning to marry and are uncomfortable with prenuptial agreements or the disclosure requirements necessary to provide effective protection may establish domestic asset protection trusts to protect against claims of potential former spouses.
Because Delaware, Alaska and Nevada were the earliest of several states to have enacted domestic asset protection trust laws, many think first of these states when considering domestic asset protection trusts. For most, Delaware presents the most favorable choice. Some states have adopted a law requiring that all current and future trust beneficiaries be given (1) “notice of the existence of the trust,” and (2) “periodic reports” that provide the trust beneficiaries knowledge of trust assets and the ability to request information about the trust. These notice and reporting requirements are often a curse to those wanting to establish trusts for asset protection and other estate planning purposes but who do not wish to disclose all the details to the trust beneficiaries. Delaware, however, has enacted laws that expressly avoid such notice and reporting requirements. It is not necessary to live in or even to visit Delaware to benefit from its trust laws. In fact, the state’s trusts can be most beneficial for those who live elsewhere.