Best States for Asset Protection Trusts for Ohioans? Put Wyoming at Top of the List
July 27th, 2012
Domestic asset protection trusts (DAPTs) are a valuable tool for protecting hard-earned assets against loss due to lawsuits, divorces, bankruptcy and other creditors. However, Ohio’s trust laws do not yet provide asset protection to self-settled trusts (trusts in which the maker is also a beneficiary) formed in Ohio. So how do wealthy Ohioans take advantage of this essential asset protection tool?
At our Dayton, Ohio asset protection attorney’s firm, when a DAPT is appropriate to a client’s asset protection strategy, we recommend creating their trust in another state. Only a handful of states permit asset protection trusts currently, and the laws of each state must be examined carefully to ensure that the chosen state’s laws afford the Trustmaker the desired level of protection and accessibility. Here are my top five picks:
States Permitting Asset Protection Trusts — My 5 Favorites
Wyoming is generally our first choice. Like trusts in all of my top five states, the Wyoming Qualified Spendthrift Trust (the state’s official title for asset protection trusts) provides a high level of protection against creditors and does not impose income tax on trusts. However, Wyoming provides the Trustmaker with broader powers than allowed by many other states and can also be structured to endure for up to 1,000 years, making it ideal as a legacy trust.
What I like most about Wyoming, though, is that it is a very conservative and politically stable state. While some other states in my top five, particularly Nevada, are running budget deficits and have been considering adding an income tax, Wyoming is clearly in the black with enough income that an income tax isn’t even being considered. Additionally, all indicators suggest Wyoming is likely to remain a conservative Republican state, which has always been good for trust law and wealth preservation historically.
Wyoming trusts are also much more affordable than most other states. With annual administration fees of roughly $1,500 per year, Wyoming’s costs are a third of Nevada’s and Delaware’s annual fees. Our Dayton, Ohio asset protection attorney’s office has formed numerous Wyoming asset protection trusts that continue to reliably protect our clients’ assets when Ohio trust laws could not.
Forbes Magazine has labeled Nevada as the “most debtor-friendly state.” This is in large part because of its trust laws, which give creditors very little recourse to seize trust assets to pay off a Trustmaker’s debts. Many believe Nevada offers more protection of this sort than any other state, particularly because of its short (2 years as opposed to Wyoming’s 4 years) statute of limitations on fraudulent transfers and complete lack of exceptions to the trusts’ protective powers (Wyoming trusts don’t protect against child support judgments).
However, these often-cited advantages have brought Nevada’s asset protection trusts under the scrutiny of the IRS and U.S. courts. Although Nevada offers a potentially higher level of asset protection to trusts, the state has a reputation for protecting con artists and other dishonest individuals. Certainly plenty of honest people have trusts formed in Nevada too, but if you don’t plan to commit fraud or skip out on child support payments, there’s no need for some of the “stronger” protective features.
Delaware, Alaska, and South Dakota
These three states offer protective value similar to Wyoming and Nevada. Many asset protection experts rank these states higher than Wyoming because their fraudulent transfer standards are closer to Nevada’s standards. But, again, if you’re not a crook, who cares?
One serious disadvantage to asset protection trusts in Delaware, Alaska and South Dakota is that their protective powers exclude judgments from divorcing spouses. South Dakota and Delaware also make exceptions for alimony judgments as well. Considering the divorce rate in this country currently, these exceptions are significant. Administration costs for trusts in these states are also higher than Wyoming’s.
In Dayton, Ohio, the asset protection attorney’s office of Gudorf Law Group, LLC, can help you determine whether Ohio trust law is adequate for your needs or trust law in Wyoming or another state best suits your asset protection needs. Call our office at 1-877-483-6730 to schedule a free consultation regarding asset protection trusts.