Trusts as vehicles for asset protection : when is it legitimate?

Abstract

The term paper aims to delineate and clarify the legitimate trust from the illegitimate trust, whilst paying particular attention to the ‘red flags’ and warning signs which separate the two. In Chapter 1, a broad introduction to the notion of asset protection is given. This includes the reasons behind asset protection, as well as examples of the different asset protection structures which are available. Chapter 2 centres around the mechanics of the asset protection trust, by first exploring the basic workings of a trust, and then moving on to the elements which ensure that a trust being used for asset protection is legitimate (outlining the red flags in the process). By ensuring the legitimacy of the trust, its efficacy in protecting the assets assigned to it is assured. The various commercial and personal uses for an asset protection trust are also outlined. The ramifications of creating an illegitimate asset protection trust are explored in Chapter 3, along with the notion of the sham doctrine and its relationship with the asset protection trust, as well as the remedies available to creditors who have been defrauded.