Video Transcript- Domestic Asset Protection Trusts in 3 min
Today, I’m going to take on a widely promoted, widely advertised product that you should stay away from. Don’t touch it. What is it? Domestic asset protection.
Well, simple, domestic asset protection and domestic asset protection trusts. This is absolutely a ridiculous way to spend your hard earned money thinking you're getting decent asset protection. It's only worth two minutes, but places like Delaware, Alaska, Nevada and several other States have enacted asset protection rules so that their corporate service providers can promote domestic asset protection trusts.
They're widely promoted by some big banks. It does not work. It is pure garbage. These people must be on some sort of drug that’s a lot stronger than anything I've heard of. They forget about the fact that there's no secrecy in Delaware. You can always get to the trustee. They forget about the main thing, that we have a Constitution in the United States. We have a Constitution with the full faith in credit clause.
What does it say? It says that any judgment in any State is enforceable in another State. Yes, you have to go through a small process. You may have to re-litigate a small number of issues- usually not, you just usually register it, but I mean they're forgetting all this. This is a sham designed to allow their domestic companies that, you know, pay a lot of – or Delaware don’t pay taxes, but pay a lot of fees, help support the government giving them a way to get more customers.
Well, they're selling you garbage. Do not do a domestic asset protection trust. It has been never tested, and until you see the Supreme Court of the United States saying that the full faith in credit clause of the Constitution is trumped by some little law enacted by a little State like Delaware or Alaska, a big State there, a State law is trumping the U.S. Constitution. You should stay away from them. They are in my mind malpractice per se.
There are some circumstances where I could see doing them, but they're not inexpensive to do. Those circumstances would be where all the assets were in say Delaware. All the defendants and plaintiffs were always going to be going to be in Delaware. There would never be a federal issue ever, and in those circumstances, I can see how you might say the full faith in credit clause is irrelevant.
But guys, it's just as much work to do a domestic trust as an offshore trust. Why not go to some place where you can make your opponent spend oh $10 to collect 10 cents? Make it so that they don’t understand the culture, the language, the rules. Why make it easy for your creditors? Actually, asset protection is game theory as much as it is reality. Yes, you need to have good technology.
Technology needs to be something you can disclose, and you need to never be ashamed of it. It has to make logical, legal, ethical sense, but why make it easy. So, bottomline, stay away from domestic asset protection trusts. They do stink. They have for 12 years, and they will continue to stink.