Quick Summary
This guide breaks down the top states for domestic asset protection trusts (DAPTs) and LLCs, explaining key legal and financial factors, and how combining domestic and offshore strategies can offer maximum protection. For more practical asset protection tips, visit the Blake Harris Law blog.
Looking for the Best States to Set Up Your Asset Protection Structures?
Asset protection is not just for the wealthy. It is a practical legal strategy for anyone looking to shield their assets from future lawsuits, creditors, or unforeseen financial risks. But where you set up your structure can significantly impact how well your wealth is shielded.
In this Blake Harris Law guide, we outline the best states for Domestic Asset Protection Trusts (DAPTs) and LLC formation and explain key legal factors to consider to help you understand which jurisdiction is best for you.
Why Listen to Us?
At Blake Harris Law, asset protection is our major focus. With years of experience establishing domestic and offshore trusts, LLCs, and customized legal strategies, our team helps clients safeguard wealth from lawsuits and creditors. We know what works best for different situations and where they are most effective.
Understanding Asset Protection
Asset protection is the process of arranging your financial affairs so that it is more difficult for your property to be taken away from you by creditor claims or lawsuits.
We often hear about asset protection trusts in celebrity divorce proceedings or when a wealthy businessman engages in estate planning strategies to give money away to heirs or charitable organizations. However, asset protection is not reserved for the rich and famous; it is a valuable tool for anyone that has amassed even modest wealth.
What are Asset Protection Solutions?
Asset protection solutions can help protect assets such as funds held in bank accounts, cryptocurrency, real estate, stocks, investments, business interests, and more from potential legal threats.
For example, if you find yourself involved in an ugly lawsuit over a car accident or other legal issue, a Domestic Asset Protection Trust (DAPT), a type of self-settled trust, allows you to protect your hard-earned assets from legal action.
Unlike other trusts, a self-settled DAPT will enable the trust’s creator to also serve as the beneficiary, making DAPTs a simple and flexible option for clients who want personal protection from creditors and lawsuits.
States Which Allow Self-Settled Trusts
Unfortunately, this attractive option is not available in all states. It is essential to know which states allow DAPTs, what to consider when selecting a state for protection, what are the best asset protection states in the U.S., and the best states for LLC asset protection.
If you are looking to shield your assets from future creditors and lawsuits, a DAPT represents the most cost-effective strategy to accomplish your goal.
As states above, only a handful of states allow the creation of a DAPT, which include:
- Alaska
- Colorado
- Delaware
- Hawaii
- Michigan
- Mississippi
- Missouri
- Nevada
- New Hampshire
- Ohio
- Oklahoma
- Rhode Island
- South Dakota
- Tennessee
- Utah
- Virginia
- West Virginia
- Wyoming
Domestic Asset Protection Trusts (DAPTs) Are Not Perfect
The obvious downside of forming a DAPT is its lack of recognition across all states. If you live or get sued in a state that does not offer explicit protections to DAPTs, there is a risk your assets may not be protected, although the legal waters are murky.
In some circumstances, however, those risks are worth it. You should always consult with an attorney specializing in asset protection before making a decision.
Want to learn more? Here is our detailed article discussing the Downsides of Domestic Asset Protection Trusts.
What to Consider When Picking a State for Asset Protection
Selecting the right state to establish your asset protection trust is a critical decision that can significantly affect how well your assets are shielded from future claims. You must evaluate several legal and financial factors to ensure your trust is both effective and enforceable.
Legal and Tax Considerations
Each state has its own rules governing asset protection. Important elements to consider include:
- State Income Tax: Some states impose no income tax on trust earnings, while others do.
- Statute of Limitations for Future Creditors: This determines how long a creditor has to challenge a transfer into the trust.
- Statute of Limitations for Discovery by Pre-Existing Creditors: This rule governs how long a creditor can attempt to locate or claim assets based on prior liability.
- Spousal and Child Support Exceptions: Some states allow exceptions that permit creditors to access trust assets for family support obligations.
- Exceptions for Pre-Existing Torts: Claims tied to events that occurred before the trust was established may fall outside of the trust’s protections, depending on the state.
Strategic Planning During Consultation
Before forming a trust, you must clearly define your asset protection goals. During your consultation with an attorney, ask yourself the following:
- From which creditors do I want to protect my assets?
- Who will serve as the trustee—an individual or a corporate trustee?
- What specific assets will be placed into the trust?
- What kind of distributions do I expect to receive from the trust, and when?
These answers will help guide the structure, jurisdiction, and terms of the trust.
Proper Use and Timing
Your primary reason for creating an asset protection trust must not be to avoid current claims or existing creditors. Trusts are designed to protect assets from future threats, and most states enforce a statutory waiting period, typically two years or longer, before trust protections fully apply.
You will also need to appoint a trustee who resides in the jurisdiction where the trust is formed. This is often a legal requirement, particularly when using states with strong asset protection laws.
Asset Location and Accessibility
Some assets, like cash, stocks, cryptocurrency, or bonds, can be transferred easily into an out-of-state or offshore trust. However, real estate is fixed by location and cannot be moved, so its legal treatment will depend on the state in which it is located, even if the trust is formed elsewhere.
This factor must be addressed in your asset protection strategy.
NOTE: Once assets are transferred into the trust, you cannot access them freely. Your access is typically limited to trustee-approved distributions under the terms of the trust agreement. This restriction is part of what makes the protection legally enforceable.
The Best Asset Protection States
Below is an overview of five jurisdictions widely regarded as the best options for establishing a domestic asset protection trust.
1. Alaska (Best for Creditor Protection)
Alaska was the first U.S. state to allow self-settled asset protection trusts. Its trust laws remain among the strongest in the country. One of the primary benefits of an Alaska DAPT is broad creditor protection.
Unlike many states, Alaska does not recognize a special class of creditors. This means a creditor must prove actual fraud before trust assets become vulnerable to legal claims. Also, Alaska law prohibits creditors from seeking court orders to compel distributions or attach trust assets. This added layer of protection reinforces the effectiveness of the trust.
One drawback, however, is Alaska’s longer statute of limitations. Creditors may challenge a transfer for up to four years after assets are moved into the trust. Those needing more immediate protection may consider other jurisdictions.
2. Delaware (Best for Gifting)
Delaware is another strong option for domestic trusts. A grantor in a Delaware DAPT can name themselves as a discretionary beneficiary, allowing limited access to trust assets in emergencies and potentially reducing exposure to gift tax.
The Delaware Chancery Court supports the enforceability of DAPTs and often rules in favor of protecting trust assets from creditors.
In some states, a federal transfer tax may apply if a grantor makes a gift, survives more than three years, and the gift exceeds the exemption limit. If made through a Delaware DAPT, this gift may not trigger estate tax liability. Similarly, if the grantor’s home state imposes inheritance taxes, using a Delaware DAPT may reduce those obligations.
Delaware also offers a three-year seal on trust proceedings, which can be extended by court order. Like Alaska, Delaware has a four-year look-back period for both future and pre-existing creditors.
3. Nevada (Best Overall)
Nevada is widely viewed as the leading jurisdiction for domestic asset protection trusts. It was an early adopter of self-settled trust legislation and remains one of the most favorable states for trust formation.
Nevada offers:
- A standard two-year statute of limitations
- No requirement for an affidavit of solvency
- A high evidentiary burden (“clear and convincing”) for creditors bringing voidable transfer claims
With no state income, estate, or inheritance taxes, Nevada also provides meaningful tax advantages. Its Spendthrift Trusts are shielded from personal and corporate income taxes, and generally protected from taxation by other states.
Nevada’s DAPT protections are clearly defined by statute, reducing reliance on court interpretations. The state also extends protection to assets from claims related to child support and alimony, which most other states do not.
Additionally, Nevada does not impose registration fees, annual reporting fees, or recurring maintenance costs. Resident agents are not required. These features make Nevada one of the most cost-efficient and protective jurisdictions for asset protection trusts.
4. South Dakota (Best for Privacy)
South Dakota is ideal for individuals focused on long-term planning and maximum privacy. The state has:
- No state income or capital gains tax
- No perpetuity limit, allowing trusts to potentially last indefinitely
South Dakota actively promotes trust use through a dedicated Trust Company Task Force and strong legislative support.
What sets South Dakota apart is its unmatched privacy protections. It is the only U.S. state that provides a permanent total seal on trust litigation records. This limits public exposure and shields trust details, even in court disputes.
South Dakota’s directed trust statutes also allow flexibility in asset management. Trustees can work with external managers and hold nontraditional assets within the trust.
5. Wyoming (Best for Settlor Control)
Wyoming offers domestic asset protection through “qualified spendthrift trusts.” While similar to other leading states, Wyoming provides unique advantages.
Although a Wyoming DAPT must be irrevocable, the settlor can retain a high degree of control, including the ability to:
- Veto distributions
- Appoint or remove trustees and protectors
- Receive retained income
- Receive distributions based on the original value of the trust
Wyoming also supports purpose trusts, which are not designed for beneficiaries, but rather for specific goals such as maintaining a family asset or philanthropic interest.
Private trust companies approved by the Wyoming Banking Commission may act as trustees, offering flexibility for those managing complex holdings.
Trusts in Wyoming can last up to 1,000 years, exceeding most states’ duration limits and supporting long-term asset preservation. Wyoming has a four-year look-back period for creditor claims and no default seal. Trust records are sealed only at the discretion of the court.
Understanding LLC Asset Protection
If you decide to form a limited liability company (LLC), you are likely focused on protecting your personal assets from business creditors and legal liabilities. An LLC is generally treated as a separate legal entity.
As its owner, you are not personally responsible for the company’s debts or obligations. However, this protection is not absolute. There are several important exceptions under both state and federal law.
For example, your personal residence, vehicle, and bank accounts may be shielded from business creditors, but your business assets remain vulnerable to legal action. Additionally, you may be personally liable in the following situations:
- Acts of personal misconduct or negligence that result in harm
- Personal guarantees on loans or contracts
- Unpaid payroll taxes owed by the LLC to the IRS
- Commingling personal and business assets, which can lead to “piercing the corporate veil”
Establishing comprehensive asset protection strategies before any legal claim or judgment arises helps you preserve financial privacy. In many cases, pairing your LLC with a Domestic Asset Protection Trust (DAPT) can add an additional layer of security, particularly in states that recognize protections for single-member LLCs.
Which States Should You Consider?
Below are five states that offer the most protection for LLC owners, particularly in single-member structures:
- Alaska: Offers strong charging order protection, including for single-member LLCs. Creditors cannot foreclose on your LLC interest, and the state does not allow court-ordered distributions to satisfy a judgment.
- South Dakota: Provides charging order protection and exceptional privacy laws, including no public disclosure of member identities. South Dakota also offers favorable trust laws, allowing for long-term security and flexible structures.
- Nevada: Known for its aggressive protection laws, Nevada offers exclusive charging order protection as the sole remedy for creditors, even for single-member LLCs. The state has no corporate income tax, no franchise tax, and no annual reporting fees for LLCs.
- Delaware: Offers well-developed business laws and court support. While protection for single-member LLCs is not as strong as in Nevada or Wyoming, Delaware provides a reputable legal framework and privacy benefits for owners.
- Wyoming: A top choice for privacy and affordability. Wyoming protects single-member LLCs through charging order limitations and allows nominee filings to keep your identity off public records. It also imposes no state income tax and has low annual fees.
Pro Tip: Forming your LLC in a protective state is only part of the solution. To maintain protection, you must treat your LLC as a separate business. This means clear documentation, proper bank accounts, and adherence to your operating agreement.
Offshore Trusts May Offer Stronger Protection
Domestic LLCs offer a solid foundation for asset protection, but they remain subject to U.S. court authority. Offshore trusts take that protection further by operating under foreign laws that do not recognize U.S. judgments.
Why Consider Offshore Trusts?
Either combined with an LLC or structured alone, offshore trusts offer key benefits over domestic LLCs, including:
- Stronger Legal Barrier: Jurisdictions like the Cook Islands and Nevis require creditors to pursue legal action locally, which is costly and time-intensive.
- Increased Privacy: Offshore trusts offer enhanced confidentiality over domestic structures.
- Reduced Risk of Enforcement: Even if a U.S. court issues a judgment, offshore trustees are not obligated to comply without a separate trial in the trust’s jurisdiction.
This combination forms a two-layer strategy. Your LLC protects you from business liability, while the offshore trust protects the LLC itself. Together, they create one of the most effective protection structures available for your assets.
You can set up one by working together with a reputable offshore asset protection attorney.
Take the Next Step in Securing Your Assets
If you are considering a Domestic Asset Protection Trust or any advanced asset protection strategy, it is important to work with a law firm that focuses exclusively on protecting wealth. At Blake Harris Law, asset protection is what we do.
We have extensive experience establishing domestic and offshore trusts, LLC structures, and multi-layered plans tailored to each client’s specific goals. If you are looking to protect personal savings, investment portfolios, or generational wealth, our team provides legal strategies designed to stand up to real-world legal challenges.
If you would like to discuss what kind of asset protection is right for your situation, contact Blake Harris Law to schedule a free, no-obligation consultation.
