How does an Asset Protection Trust operate?

The Trust protects your assets because the funds placed in the Trust account are unavailable to persons who sue and may win a judgment against you. They may also be unavailable to a court in the US to hold (freeze or encumber) while a lawsuit is pending but before there is any judgment rendered in the case.

For example, say you have $500,000 in a local bank. Assume you are sued and are ordered to pay a judgment of $250,000. Since you have control over the $500,000 and the funds are available, you would have to pay the $250,000 judgment. Your money is not protected. Now, instead of keeping the funds in the local bank, you gift the $500,000 into a Trust account. The transferred funds may be invested in either US or offshore investments probably similar to the type you currently hold. These may be in US banks, or brokerage accounts, or may be in offshore accounts with major banks or brokerage firms.

Either way, this money is much safer from a judgment, because you no longer own the $500,000, the Trust owns it. Essentially, you are placing your money into a foreign trust that is out of reach of potential creditors. By giving up the ownership of the assets, you are placing them beyond reach of a US court, who could order you to surrender them. If you do not own them, or do not have signature authority over the accounts where the assets are deposited, it is impossible for you to comply with any US court order to surrender them. This is a perfectly legal position to take. (There is more to the concept than this quick summary, but the principle is clear.)

What is a Trust? What is the purpose of an Asset Protection Trust? Do we want a Foreign or Domestic Trust? What is a Domestic Asset Protection Trust? What is a Foreign Asset Protection Trust? Are my life long accumulated assets susceptible to creditor attack? How does an Asset Protection Trust operate? Who manages or administers the trust and the trust funds? Does an Asset Protection Plan make sense for me?