Asset Protection Trust is a legal arrangement that allows individuals or companies to safeguard their assets from creditors and potential legal claims by placing them in a trust managed by a third party.
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Last Updated: December 11, 2025
An asset protection trust (APT) is a tool used to shield assets from creditors, lawsuits, or claims made against an estate. To create an APT, an individual (the settlor or grantor) writes the terms of the trust, appoints a trustee and beneficiary, and transfers property and assets to the trust.
To effectively protect someone’s assets, this kind of trust must be irrevocable. This means that the trust can’t be amended or revoked after setup unless the trustee approves. Additionally, the person who set up the trust has no control over the assets once they’re transferred to the trust. Rather, the trustee manages the trust assets and only makes distributions according to the trust terms.
The effect of an APT is that any assets put into the trust are no longer considered the property of the person who put them there. If a creditor files a claim against a person and wins, the trust assets are untouchable and can’t be used to satisfy the judgment because they don’t belong to that individual anymore. It’s important to note that not all states legally recognize APTs; asset protection trusts can only be set up in the states where they’re recognized.
Domestic asset protection trusts are created in the U.S. within a state that permits APTs. A domestic APT is attractive because it’s easier and less expensive to establish than a foreign APT. However, domestic APTs are relatively new, so their asset protection isn’t as certain compared to a foreign APT. They’re also currently available in less than half of all U.S. states.
A foreign (or offshore) APT is a trust established outside of the U.S. In general, they’re more expensive to set up than domestic APTs, but they have broader privacy protections and can offer tax advantages.
The biggest advantage that an APT offers is protection against lawsuits and creditors. This powerful tool can safeguard a person’s assets from a personal injury claim or lawsuit. APTs are also relatively simple to set up.
As mentioned above, APTs are irrevocable. It’s challenging to alter them. Anyone considering this asset protection strategy would be wise to consult with a financial or legal advisor. APTs also aren’t available in every state and can be expensive to create, particularly foreign ones.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
Written by ZenBusiness Editorial Team
The ZenBusiness Editorial Team has more than 20 years of combined small business publishing experience and has helped over 850,000 entrepreneurs launch and grow their companies. The team’s writers and business formation experts are dedicated to providing accurate, practical, and trustworthy guidance so business owners can make confident decisions.
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