The most basic form of asset protection is to use an LLC to protect the assets inside the LLC from your personal creditors. Even though the level of asset protection available to both single member and multi-member LLCs has been suffering from adverse court decisions recently, we are still comfortable using LLCs for asset protection purposes. Setting up an LLC in Colorado is the most straightforward approach. As a result, the fee involved is the least when compared to other structures. We can set up an LLC in Colorado designed to hold passive investment assets for approximately $3,500 in legal fees plus expenses (such as the required filing of the Articles of Organization with the Colorado Secretary of State, which is currently $50). We regularly form LLCs in other jurisdictions to take advantage of other asset protection laws. We can typically form these LLCs for approximately $5,500 plus expenses.
The next step up the ladder with respect to asset protection is to use a domestic trust to hold your investments. Wyoming, South Dakota, Delaware and Alaska are great jurisdictions for forming domestic asset protection trusts. A trust formed in one of these jurisdictions (or another jurisdiction that has asset protection trust legislation, such as Nevada or Hawaii) is generally thought to have stronger asset protection than domestic business entities (such as LLCs). The fees involved for these structures differ depending on how the structure is implemented. However, the typical first year cost for a domestic asset protection trust, for instance, will be about $15,000 – $20,000 (including the fee of the trustee but exclusive of accounting and similar costs).
A foreign trust in an asset protection jurisdiction is generally considered to be the best asset protection structure for liquid assets. In just about every foreign asset protection trust we’ve set up, we have hired the accountant directly (foreign trust reporting to the IRS is both required and detailed). Therefore, including the cost of the required tax returns, the cost of establishing this type of structure is approximately $25,000 – $35,000.
We draft a lot of irrevocable life insurance trusts to hold life insurance policies outside of your future taxable estate. Many of our basic life insurance trusts cost $5,500 per person. If specialized planning is required in the trust (such as attempting to make the trust “non-grantor” or using special needs distribution provisions), the cost will go up accordingly (a cost of $7,500 is a good estimate for these specialized life insurance trusts).
There are a number of other trusts that we use to minimize your future estate tax. These trusts can cost from $5,500 to over $15,000.