How Much Asset Protection Trusts Cost

An asset protection trust (APT) is one of the most effective tools to protect your assets from creditors, lawsuits, divorces, and other dangers. An APT is a special type of irrevocable trust which allows you to legally relinquish ownership of the assets you transfer into it, while still retaining the benefits and practical day-to-day control. 

Being the ultimate tool for asset protection, APTs also come with a steep price tag. This can differ quite drastically depending on whether you choose to establish a foreign asset protection trust (FAPT) or a domestic asset protection trust (DAPT), as well as due to numerous other factors. 

In this article, we will provide a realistic idea of how much an asset protection trust costs and whether it is worth the price tag. 

Table of Contents:

• What Is The Cost Of An Asset Protection Trust?
• Advantages
• What Is The Cost Difference Between A DAPT And A FAPT?
• Which Type Of APT To Choose?
• Other Factors Affecting The Cost Of An Asset Protection Trust
• Level Of Complexity
• Reason And Circumstances For Setting Up The Trust
• Level Of Legal Expertise
• Is An Asset Protection Trust Worth The Cost?

What Is the Cost of an Asset Protection Trust?

Before we go into the finer details, let’s get a rough idea of just how much an asset protection trust can cost. 

The cost of an APT can range anywhere from $3500 to $50,000 as total initial setup costs. Then there are also annual maintenance costs which include administration and asset management fees which can easily come to $2000 - $5000 per year plus a small percentage of the total value of the trust fund value. 

As you can see, trying to put an exact benchmark figure on the cost of an APT is simply not possible with that kind of range of price. It should also be clear that an asset protection trust is not cheap. So, you should consider carefully whether you really do need an APT and if the benefits you will get from it will outweigh the high monetary cost. 

Advantages

When it comes to APTs, the most important distinction is between Foreign and Domestic APTs (FAPTs vs DAPTs), and it is also the primary factor driving cost difference.

A FAPT is any APT formed in an offshore jurisdiction that is different to the one in which the grantor (creator) of the trust resides. A DAPT is an APT that is formed in the same country in which the grantor resides. 

The cost of setting up and maintaining a FAPT is much higher than a DAPT, but it comes with some significant advantages:

• Stronger asset protection: an APT in the right offshore jurisdiction (e.g., Cook Islands, Cayman Islands, Nevis, etc.) provides much stronger asset protection than a domestic trust. There is an added layer of protection as the assets are kept in a completely different legal jurisdiction. Furthermore, these countries have stronger asset protection laws for trusts compared to the U.S. 
• Added privacy: keeping your assets in a foreign trust naturally ensures that they are more private from local records, courts, and the public. Offshore jurisdictions like Cook Islands maintain strict privacy over the parties involved in an APT, and typically the names of the parties involved do not even need to be registered in any public record. 
• Tax benefits: FAPTs are most commonly formed in tax havens like Cook Islands and Nevis, which can lead to substantial tax savings when used as part of an integrated tax management structure. All asset protection trusts can provide a reduction in taxes as they avoid probate procedures and bypass estate taxes, but an offshore APT can lead to much greater tax efficiency than a DAPT, especially for the grantor of the trust.  These additional tax savings can more than make up the difference in cost of a FAPT if you are dealing with a large enough estate.

 

What is the cost difference between a DAPT and a FAPT?

There are clearly good reasons to choose a FAPT over a DAPT, but just how much of a cost difference are we dealing with?

The total cost to set up a domestic asset protection trust typically lies in the range of $3000 - $10,000.

The exact cost depends on several additional factors such as the state in which you decide to set up the trust, which will in turn determine the standard legal fees charged. The level of expertise of the attorney you choose will also have an impact. Some will charge a flat rate for setting up the trust while others will charge an hourly rate. 

In addition to the initial setup costs, there are usually some ongoing fees to maintain the trust. These include trustee fees for hiring professional third-party trustee services, which is needed if you opt to form the trust in another state or country. Then you will need to pay the legal fees for maintaining the trust.

Some will have standard annual maintenance fees while others will just charge an hourly rate for any additional work required in future after the trust has been created. All this adds up and can easily come to about $2000 - $3000 per year.  

The total cost to set up a foreign asset protection trust typically lies in the range of $10,000 - $30,000. Offshore trusts are much more expensive than DAPTs for a few reasons:

• They are more complex instruments and so require more time and expertise to set up. 
• They involve other parties in foreign countries which results in additional layers of fees.
• The legal professional you hire will need to have expertise both in US trust and compliance laws, as well in the foreign jurisdiction in which the trust is formed. Such an attorney does not come cheap.

You will also have to pay annual compliance and maintenance fees for your FAPT, which can easily come to $2000 - $5,000 per year. One of the main reasons for such high maintenance costs is the compliance standards imposed by the local US authorities. It is common for big corporations and wealthy individuals to move their assets offshore to avoid taxes. This has roused suspicion with the federal government and so they have enforced stringent reporting and compliance requirements.

These include annually filing forms 3520 and 3520-A. It is a complex task which involves hours of legal work and therefore high fees. You can aid the process (and in turn reduce the legal costs) by keeping meticulous records of all financial transactions related to your trust.

With all that being said. Since we are a Panama-based law firm, we have the ability to price out our services different compared to a US based law firm. For example, the cost of a Cook Islands Trust is often quoted between 15,000-25,000+ or more for US based law firms while we can form a trust for 8,000USD.

We have been forming trusts for over 25 years and have thousands of clients who have been able get offshore protection. Get in touch to see if we are right for you.

Which Type of APT to Choose?

Ultimately, deciding whether to setup an asset protection trust offshore or domestically comes down to your personal circumstances and preferences.

There certainly are reasons to go for a higher-cost FAPT, but for many people, the price difference is simply not worth it given their needs and financial position. Some asset protection attorneys swear by domestic APTs, arguing that they are just as effective as offshore ones, but for a fraction of the price and without the same level of complexity.

It is true that for most ordinary situations, a domestic APT is perfectly sufficient. For those with an extremely high net worth they wish to protect, or with special requirements that cannot be satisfied locally, a FAPT may indeed be warranted. 

 

Other Factors Affecting the Cost 

The primary factor affecting the cost of an APT is location; not just domestic vs foreign, but also precisely which state/jurisdiction the trust is formed in. However, there are also other elements which can alter the overall cost of an asset protection trust:

Level of Complexity

Location is not the only thing that determines the level of complexity of setting up a trust. It also depends on the client’s asset portfolio itself. Some clients have a more diversified investment portfolio, including a wide range of complex financial instruments in different jurisdictions. In such cases, it will require more time and effort for the attorney to set up the trust.

The trust document will also vary in its complexity depending on the exact terms of the trust, special provisions which are added, the nature of the assets in the trust, and several other factors. All this will impact the legal fees for setting up the trust. 

Reason and Circumstances for Setting It Up

Another factor which can affect the cost of a trust is the outward circumstances under which you decide to set up the trust, and your reasons for doing so. It is always preferable to set up a trust long in advance of any serious issues arising. Not only will this avoid any potential fraudulent conveyance accusations and therefore serve better at protecting your assets, but it will also help to reduce costs.

If you are in the unfortunate situation where you are already faced with a legal battle and have not yet set up a trust, the outlook is less favourable. In many cases it might still make sense to try set up the trust, and there are instances when it can still work to protect your assets, but it is far less guaranteed due to fraudulent conveyance.

Additionally, such a situation will make it more difficult to set up the trust, and your attorney will have to work swiftly and with extra diligence. Naturally this will also cost you much more. 

Level of Legal Expertise

It is no secret that not all legal experts are equal. If you want to hire the most highly renowned and successful asset protection attorney to handle the setup of your trust, it will of course cost you more than hiring just your average neighbourhood lawyer.

This is also why it costs so much to set up an offshore APT, as usually only the best asset protection attorneys are sufficiently qualified to set up these sophisticated instruments. 

Is it Worth the Cost?

Asset protection trusts are one of the most powerful vehicles to protect your hard-earned assets, but are they worth the high cost?

There is really no clear-cut answer to this question, and it comes down to each person’s individual situation. For some high-net-worth individuals, an APT would absolutely be worth the high costs, as it would be a small price to pay to protect their valuable estates. For others, the costs would just be too high over the long run to warrant using such a sophisticated tool.

Even if the cost is worth it, your circumstances may be such that another financial tool would be more effective at protecting your assets. 

The key point here is that not everyone needs an asset protection trust. Furthermore, of those who do need an APT, not everyone needs the highly specialised FAPT, as setting up a trust domestically could be perfectly sufficient. A general rule of thumb is that if you have an estate value of at least $1 million, you should consider setting up an asset protection trust domestically. Those with an estate of at least $5 million should consider going for the more expensive option of a foreign asset protection trust. 

These numbers are very rough guidelines, and it really comes down to your personal preferences and situation. For example, the cost of an APT could be well worth it for those in professions with a higher risk of getting sued (e.g., doctors, lawyers, business owners, architects, etc.), even if they have a net worth below $1 million.

It is always best to consult with an expert asset protection attorney who can help you determine the best way to protect your assets, and advise on whether setting up an asset protection trust is the right step for you to take.