Where to Situs a Trust: An Analysis of U.S. Asset Protection States

WHERE TO SITUS A TRUST – 

AN ANALYSIS OF U.S. ASSET 

PROTECTION STATES 

By: 

Professor Denis Kleinfeld, Esq. 

Of Counsel to 

Fuerst Ittleman David & Joseph PL 

Miami, Florida 

Florida Bar Annual Wealth Protection 

Conference 

May 16, 2013 

Copyright 2013 Denis Kleinfeld 

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Copyright 2013 Denis Kleinfeld 2

“THE DESIRE TO PROTECT ASSETS FROM 

THE UNKNOWN, UNEXPECTED, AND 

UNINTENDED RAVAGES OF THE LEGAL 

SYSTEM HAS LEAD TO A DRAMATIC RISE IN 

DOMESTIC ASSET-PROTECTION TRUST 

PLANNING.” 


Denis Kleinfeld 

3

COMMONLY USED VEHICLES 

FOR WEALTH PROTECTION 

CORPORATIONS 

LIMITED PARTNERSHIP 

LIMITED LIABILITY COMPANY 

LLP AND LLLP 

TRUSTS 


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TRUSTS COMMONLY USED FOR 

“WEALTH” PROTECTION 

SPENDTHRIFT TRUSTS (i.e. Credit Shelter) 

SUPPORT TRUSTS 

CHARITABLE TRUSTS 

ILITS 

GRITS, GRATS, GRUTS, QPRTS 


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TRUSTS COMMONLY USED FOR 

“WEALTH” PROTECTION 

SHIFTING INTEREST TRUSTS 

EDUCATIONAL TRUSTS 

SELF-SETTLED ASSET PROTECTION TRUSTS 


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DOMESTIC ASSET PROTECTION 


JURISDICTIONS 

ALASKA Alaska Stat. §34.40.110 (1997) 

COLORADO Colo. Rev. Stat. §38-10-111 (1861) 

DELAWARE Del. Code Ann. Tit. 12, §§3536(c), 

3570-3576 (1997) 

HAWAII Haw. Rev. Stat. § §__-1-__-12, added by 

2010 Haw. Act 182 § 2 (2010) 

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JURISDICTIONS 

ILLNOIS 760 ILCS 5/16.3, 5/16.7 (2012) 

MISSOURI Mo. Ann. Stat. §456.5-505 (2005) 

NEVADA Nev. Rev. Stat. § §166.010-166.170 

(1999) 

NEW HAMPSHIRE N.H. Rev. Stat. Ann. § §564-B:5-505(c), 

564-D:1-564-D:18 (2009) 

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JURISDICTIONS 

OKLAHOMA Okla. Stat. Ann. Tit. 31, §§ 10-18 (2005) 

RHODE ISLAND R.I. Gen. Laws §§ 18-9.2-1-18-9.2-7 

(1999) 

S. DAKOTA S.D. Codified Laws Ann. §§ 55-1-36, 

55-16-1-55-16-17, 55-3-39, 55-3-41, 

55-3-47 (2005) 

TENNESSEE Tenn. Code Ann. §§ 35-16-101-35-16- 

112 (2007) 

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JURISDICTIONS 

UTAH Utah Code Ann. § 25-6-14 (2003) 

VIRGINIA Virginia Code § §55-545.032 and 

55-545.03:3 

WYOMING Wyo. Stat. § §4-10-103, 4-10-506(b), 


4-10-510-4-10-523 (2007) 

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BASIC APT ASSET HOLDING 

ASSETS 


STRUCTURE 

APT 

LIMITED 

LIABILITY 

ENTITY 

MEMBER OR INTEREST 

HOLDER 

CASH SECURITIES REAL ESTATE 

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CONSIDER EFFICIENCY OF 

SAME STATE LIMITED 

LIABILITY ENTITY STATUTE 

Not all states are equal. 

Limited number of states have LLC charging order protection 

as sole remedy. 

Limited number of states have L/P/S charging order 

protection as sole remedy. 

Special purpose vehicles are just becoming adopted. 


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WHAT IS A SPECIAL PURPOSE 

VEHICLE 

1. Used to hold membership, shares or interests in 

Trust Protector Entity 

Investment Committee entity 

Distribution Committee entity 

2. Limited liability to those providing administrative nonfiduciary 

services. 

3. Enables insurance coverage 

4. Facilitates succession because of disability, death resignation 


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WHAT IS A CHARGING ORDER? 

1. Not a lien. 

2. The lien is what is placed on the LLC membership interest. 

3. The creditor in nearly every state is limited to the “exclusive 

remedy” of the charging order as opposed to other remedies. 

4. If the LLC statute does not limit the other remedies (i.e. 

alter-ego, nominee) then the creditor can get around the 

charging order as the exclusive remedy. 


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WHAT IS A CHARGING ORDER? 

5. Overlooked is that charging orders may also contain certain 

injunctions freezing distributions. 

6. Consequently, there is a stalmate – until creditor or debtor 

wins out in time. 

7. Charging orders can (and usually are) complicated. 

8. Proper state statute can reduce or eliminate the problem. 


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HOW TO CREATE AN APT 

DUE DILIGENCE 

CROSS BORDER REPRESENTATION 

ASSET ANALYSIS AND SELECTION 

COSTS 

Establishment 

Maintenance 

Termination 


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UNDERSTANDING 

FRAUDULENT TRANSFER LAW 

STATUTORY FRAMEWORK OF UFTA 

COMPUTING INSOLVENCY 

FLORIDA COURT CASES DEFINITION 

REMEDIES 

UNDERSTANDING CONTEMPT OF COURT 

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LIABILITY EXPOSURE FOR 

ETHICAL RULES 

Civil Liability 


LAWYERS 

– Aiding and Abetting 

– Conspiracy 

Criminal Exposure? 

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PROS AND CONS OF 

DOMESTIC APT BENEFITS 

DOMESTIC APT 

Asset Protection 

Tax Benefits 

Protect Estate Plans 

Allow Domestication of Offshore Trusts 

Attract Non-U.S. Business 


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ATTACKS: 

PROS AND CONS OF 


DOMESTIC APT 

Jurisdiction 

Venue 

Non-APT Court Recognizing APT Law 

Full Faith and Credit 

Impact of Bankruptcy 

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DRAFTING AN APT 

DESIGN REQUIREMENTS 

Assets – All or Nest Egg 

Funding and Income Requirements 

Control 

Estate Plan Integration 

Understand the Statutes and Case Law (and 

Constitution) 


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CRITICAL DRAFTING AND 

PLANNING CONSIDERATIONS 

INDEPENDENCE OF TRUSTEE 

SAFETY OF PROTECTOR 

LOCATION OF ASSETS 

IDENTIFICATION OF BENEFICIARIES 

APPOINTMENT AND DISCRETIONARY POWERS 


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INCOME TAX 

GIFT TAX 

ESTATE TAX 

GST 


FEDERAL AND STATE 

TAX CONSIDERATIONS 

TAX COMPLIANCE 

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CONCLUSION 

APT’S FOLLOW THE RISE OF LLE’S – States want the business 

LITIGATION IS AMERICA’S DOMINENT GROWTH INDUSTRY 

CLASS WARFARE OVER WEALTH CONTINUES UNADATED 

ALWAYS REMEMBER THE SECOND RULE OF HEADS UP LEGAL 

PRACTICE. 

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A copy of this Presentation can be accessed at 

www.fuerstlaw.com /WealthAssetResources 

Copyright 2013 Denis Kleinfeld 25

Where to Situs a Trust: An Analysis of U.S. Asset Protection States

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