![Wyoming is one of the few states that allows for the establishment of what is known as a self-settled trust. How can celebs protect their assets?](https://filmdaily.co/wp-content/uploads/2022/03/celebs-trusts-lede-1536x1006.jpeg)
How Celebrities Protect Their U.S. Assets Through Wyoming
Wyoming is one of the few states that allows for the establishment of what is known as a self-settled trust. This is a type of trust which allows the person who established the trust to also be its beneficiary. This is a unique form of asset protection as it effectively removes the assets from your ownership and transfers this ownership to the trust. As a result of this, these assets cannot be taken away from you by creditors or in the case of a divorce. Two situations which celebrities seem to frequently encounter.
Self-Settled Trusts
Benefits and Uses
As mentioned, a self-settled trust is a trust which you will establish for the benefit of yourself as opposed to the historically more common trusts which are formed for the benefit of a third party. States which are trust friendly, such as Wyoming, allow for self-settled trusts and these trusts have the same benefits and asset protection of trusts which are set up for others. This evolution of trust law was brought about as a result of a want to compete more aggressively with offshore asset and tax havens.
The fundamental principle of a self-settled trust is that it is established for your own benefit. The allowance for the creation of this type of trust facilitates strong asset protection benefits which are not seen in other states such as Texas and California. The assets which are held in the trust cannot be expropriated as the trust legally exists on its own title. This has the ability to protect any assets and wealthy individuals stand to gain the most from this protection. There are many situations in which a self-settled trust will be useful. An example of such a situation would be to dissuade lawsuits against you in a personal capacity. This would be because you, as an individual, do not own assets in the eyes of the law and as a result a judgment granted against you would not be able to be attached to anything.
Another use of self-settled trusts is to protect your personal assets in a way that a limited liability company cannot. While an LLC will shield your personal assets from liability which is incurred by the company it will not protect your personal assets from liability which is incurred by you as an individual. In such an example your assets would not be available for your creditors to target as they are owned by the trust and not by you.
You are allowed to form a self-settled trust in a state in which you are not a resident. This is true even when the assets which you are placing into the trust are physically located in another state. This makes self-settled trusts a very versatile asset protection tool. Allowing asset protection all over the nation without the need to physically relocate any assets.
If you would like to learn more about self-settled trusts and their immense practical value for asset protection consider this resource as a helpful guide.
Law Regarding Self-Settled Trusts
The courts have taken a view on the enforceability of self-settled trusts when the assets are held in a different state to the trust itself. This view has been criticized heavily from an academic standpoint. For the more than twenty years since self-settled trusts were first established there has been surprisingly little case law which deals with these sorts of trusts. This was broken when a court in Washington, ruling on a bankruptcy case, decided that, “a public policy exception trumped standard choice of law analysis”. What this means is that a condition requiring consideration of public policy in relationship to self-settled trusts superseded the ordinary approach which courts take when deciding which states laws to apply in an interstate case. This decision has created more confusion than it has created clarity as the manner in which it came to this conclusion has been argued to be flawed.
The result of this flawed judgment was that the court applied the law of the state in which the case was heard instead of the law of the state in which the trust was established. This essentially invalidated the asset protection which the trust was established to provide. However, it is argued that this was the incorrect decision to make on the matter because the law regarding public policy was incorrectly applied to this specific scenario. Additionally, the precedent which this case establishes is not consistent as it allows for political partiality when the manner in which the law must be applied is clear. When considering a case, the court will take into account not only other case law but also academic literature which engages with the topics of the case. This means that harsh criticism of a judgment in the academic space can and does have a tangible effect on the application of the law in practice. Furthermore, this was a particularly fringe example and the protection which self-settled trusts provide is not weakened in any way by the existence of such a case.
Lifetime Proxy and Anonymity
Another unique feature of Wyoming law is the ability to appoint a lifetime proxy. This allows an individual to own and control a business but have it registered in another individual’s name. The proxy in this case serves as an extension of the wishes of the owner and takes actions at their behest. This allows individuals to anonymously own companies, particularly LLCs. A further benefit of this feature is that it allows a greater degree of privacy in business dealings. This is especially the case when considering the fact that a Wyoming anonymous LLC may own another LLC in another state. This means that it is possible to maintain anonymous control and ownership of an LLC or other type of business entity outside of Wyoming. Providing asset protection as well as privacy which few other states can come close to.
Final Thoughts
The manner in which many celebrities protect their assets through Wyoming is through the establishment of self-settled trusts. These trusts have tremendous potential and utility for asset protection as they remove assets from your name but not from your ownership or ability to control. This leaves you in the beneficial position of being able to enjoy the fruits and benefits of owning these assets while not leaving yourself liable to many of the risks associated with doing so. This is a particularly effective method of dissuasing legal action as you would technically not own any assets if a decision were to be made in your opponent’s favor. This makes self-settled trusts incredibly useful for the purposes of asset protection in a multitude of scenarios.