There are many asset protection strategies, and the more expensive and complex ones are not always the best. I like the comment made by Jay Adkisson (a nationally recognized asset protection planner) in the May 11, 2009 issue of Forbes Magazine. He basically says the best ways are the old ways.
While that is a big generalization, there is a lot of truth in it. Offshore trusts, so called “domestic asset protection trusts” (permitted by statute in states like Alaska and Nevada) and other more exotic asset protection techniques may all have their place — given the right circumstances. But for most executives, small business owners, physicians, and others in need of asset protection, more traditional devices should be considered first. Simply dividing certain assets between spouses may be helpful. Many traditional trust arrangements, including an irrevocable life insurance trust (ILIT), can often provide significant protection. So can one or more limited liability companies. They are easy to set up and provide excellent protection when properly utilized. Using a family limited liability company in conjunction with a revocable trust can be a relatively inexpensive way to protect assets, and potentially provide significant estate tax savings.
I advise clients to focus initially on traditional, relatively less expensive asset protection strategies. If those appear inadequate, then consider other alternatives. But do not start with the assumption that you need an offshore trust in order to reasonably protect your assets. Many more ordinary arrangements may provide all the protection you reasonably need — without many of the drawbacks of more complex arrangements.