As a cryptocurrency investor, you have unique concerns that may not be addressed by the traditional wealth management products in your state. For example, if you realized substantial gains in your cryptocurrency investments, you may need a safe place to keep your recently accumulated wealth. Additionally, privacy may be a concern. At the same time, you want to maintain control over the assets as well as ensure your continued access to them. A Wyoming asset protection trust addresses all of these issues by offering you a safe place to keep your bitcoin and other cryptocurrencies that is beyond the reach of creditors. Wyoming domestic asset protection trusts also allow you to access your cryptocurrency on your terms, so you can ensure they will be there when you need them.
However, Wyoming asset protection trusts are complex, and if they are not properly set up, they provide no protection at all. Moreover, there are strict requirements that must be met in order to open up a Wyoming APT in the first place. Thus, it is essential that you work with an experienced cryptocurrency investor lawyer when considering whether a Wyoming APT is right for you.
What Is an Asset Protection Trust?
An asset protection trust (“APT”), also referred to as domestic asset protection trust (“DAPT”), is a special type of trust that, when properly structured and funded, places the assets contained in the trust beyond the reach of creditors. Another key characteristic of an asset protection trust is that the creator of the trust can be named as a beneficiary, allowing them to access trust assets. In this way, an asset protection trust not only protects assets but also can help to avoid the threat of litigation because the trust acts as a deterrent to would-be litigants.
Below are 5 things to consider when creating a Wyoming asset protection trust:
Wyoming Asset Protection Trusts Offer Favorable Tax Treatment
One of the possible benefits of an asset protection trust is that, depending on where you create the trust, it may allow the creator to shield trust assets from income-tax exposure. This is one of the main draws to a Wyoming asset protection trust because Wyoming is one of only a handful of states that does not impose a state income tax.
An Unfunded Trust Provides No Protection
One of the most common mistakes individuals make when setting up a Wyoming asset protection trust is that they do not fund the trust after its creation. An unfunded trust provides absolutely no protection because there are no assets in the account to protect. Thus, if you are considering a Wyoming asset protection trust for the purposes of holding your cryptocurrency, it is essential that you properly arrange for the transfer of your cryptocurrency into the trust once it’s created.
The Protection a DAPT Provides Is Not Absolute
While Wyoming asset protection trusts can shield your cryptocurrency from most creditors in most situations, it is important to understand the limitations of these trusts before embarking on this strategy. In fact, there are certain situations in which a third party may be able to bypass the protections offered by the trust. For example, child support orders may remain enforceable against trust assets. Additionally, if the assets transferred into a domestic asset protection trust were pledged as collateral to obtain credit, the creditor may be able to seize those specific assets in the event of a default. Finally, assets placed into the trust in violation of the Uniform Fraudulent Conveyance Act or those that are transferred in an attempt to defraud do not enjoy the protections the trust generally otherwise provides.
There Are Formal Requirements You Must Meet to Create a Wyoming Asset Protection Trust
To realize the benefits of an asset protection trust, you must set up the proper type of trust in the correct way. Below are a few of the requirements for a Wyoming asset protection trust:
Asset Protection Trusts Must Be Irrevocable
By their nature, all asset protection trusts must be irrevocable. The irrevocability of an asset protection trust is what provides protection from creditors. However, irrevocable trusts require significant planning because once the trust is established, it cannot be modified or terminated. Thus, it is essential to work with an experienced blockchain lawyer when setting up a Wyoming asset protection trust.
You Must Have a Registered Agent
One of the lesser-known requirements of a Wyoming asset protection trust is that anyone who does not live in Wyoming must name a registered agent for the trust. Under Wyoming law, a DAPT is a business, and a registered agent represents the interests of the business in the state. A registered agent must have a Wyoming address, is required to be physically present at this address during business hours, and is the party who will be served in the event the trust is named as a defendant in a lawsuit.
You Cannot Serve as the Trustee
A trust is a legally defined relationship between at least three parties. The grantor creates the trust, the trustee oversees the trust according to the grantor’s directions, and the beneficiary (or beneficiaries) are those for whom the trust is set up to benefit. In a Wyoming domestic asset protection trust, you can serve as both the grantor and the beneficiary. However, you cannot serve as the trustee. Thus, you must name either a private trustee or a professional trustee to oversee the administration of the trust. The trustee will be the one making investment decisions; however, you can provide detailed instructions to the trustee and clarify when disbursements are to be made.
Misinformation Is Pervasive
The rapid acceptance of bitcoin and other cryptocurrencies—as well as the corresponding increase in successful crypto investors—has led to a new market for blockchain lawyers. While many of these attorneys have good intentions, they lack the skill and knowledge to effectively create and maintain the tools necessary to ensure investors receive exactly what they are looking for. Wyoming asset protection trusts are unique, and those interested in these trusts should ensure they work with an experienced cryptocurrency lawyer who has significant experience not only setting up these trusts but also dealing with the various other legal issues cryptocurrency investors face.
Frequently Asked Questions:
Can a Wyoming Asset Protection Trust Protect Cryptocurrency Investments from Creditors?
Yes, a Wyoming asset protection trust can protect bitcoin and other cryptocurrency investments from creditors by placing them beyond their reach in the event of a lawsuit, bankruptcy or divorce. However, to realize this protection, a trust must be properly structured and funded. Wyoming asset protection trusts are unique in the protection they provide; however, they are also complex and highly regulated. Thus, it is essential to work with an experienced blockchain lawyer when creating and funding a Wyoming asset protection trust.
Are There Exceptions to the Protections Offered by a Wyoming Asset Protection Trust?
Yes, the protections offered by a Wyoming asset protection trust are not absolute, and there are exceptions in which a creditor or other third party can access trust assets. For example, a Wyoming asset protection trust will not protect cryptocurrency investments in the following situations:
- You have outstanding child support obligations in Wyoming or any other state;
- The assets you transferred into the trust were pledged as collateral to secure credit;
- You transferred assets into a Wyoming asset protection trust in violation of the Uniform Fraudulent Conveyance Act; and
- You transferred assets into the account with the intent to defraud another person or entity.
However, when properly structured, most of these exceptions will not apply. At Oberheiden, P.C., our dedicated team of cryptocurrency and blockchain lawyers effectively advise investors on the proper structure of Wyoming asset protection trusts to ensure they provide the benefits they are intended to.
Do You Need a Lawyer to Create a Wyoming Asset Protection Trust?
Technically speaking, there is no legal requirement to retain the services of a cryptocurrency and blockchain attorney to create a Wyoming asset protection trust. However, you do need to name a trustee who is authorized to administer the trust in Wyoming. Additionally, working with an attorney who is experienced in these complex instruments is smart, especially for cryptocurrency investors looking to protect their assets. Many Wyoming wealth management and estate planning law firms are not yet accustomed to addressing the unique needs and goals of cryptocurrency investors. However, the blockchain lawyers at Oberheiden, P.C. have both local and national experience advocating on behalf of crypto investors in a wide range of legal issues, including the creation and maintenance of Wyoming asset protection trusts.
Contact the Blockchain and Cryptocurrency Lawyers at Oberheiden, P.C. with Your Questions About Wyoming Asset Protection Trusts
At Oberheiden, P.C., we are at the forefront of the developing area of law surrounding cryptocurrency and blockchain. Our lawyers have centuries of experience operating in the legal and regulatory environment—many of which come from working within the federal government. We command an unrivaled understanding of the laws and regulations that apply to cryptocurrency investors, as well as the unique laws that govern Wyoming asset protection trusts. We are immediately available to schedule a free consultation to discuss your needs and determine an effective plan for protecting your investments. To learn more, and to schedule a free consultation today, reach out to Oberheiden, P.C. through our secure, confidential online contact form.