Can You “Hide” Your Assets Legally?

I’ve had a number of clients ask me if it is possible for them to “hide” their money legally. The answer is, of course, not a simple one. It really depends upon who you’re trying to hide it from and how you define the word “hide” in this context.

Can you conceal how much wealth you have from those whom you casually associate with on a regular basis? Sure. Why not? Don’t dress expensively, drive a Maserati, vacation in the French Rivera, or live in a palace on the mountain benches and you’ll probably be able to fly underneath the radar of most people.


But when you start trying to conceal how much you own from the IRS or a judge who presides over a trial where you’re being sued because of wrongs that you’ve committed against others, you must be nothing less than perfectly honest. But that doesn’t mean that you can’t take steps to protect your assets from those who would file frivolous lawsuits against you or your family members.

One legal method for protecting assets that has been discussed a great deal lately amongst estate planning and asset protection attorneys is referred to as a “DAPT” or Domestic Asset Protection Trust. These types of trusts have been authorized by law in a small handful of states, including Utah, to allow an individual to protect their assets from certain types of creditors. Alaska has also authorized these types of trusts.

Recently, an Alaska court was asked to rule on the effectiveness of one of these trusts in the case of Battley vs. Mortensen. The court held that although the trust met the State law’s time limitations required for protecting the assets in the trust from creditors, the trustmaker (Mortensen) did not satisfy the time limitations under the 2005 revisions to the Federal Bankruptcy Code which required that such a trust have been made 10 years prior to filing for bankruptcy. In this case, Mortensen filed for bankruptcy well before the 10 year period had passed and the court found that the reason Mortensen had created the trust was that his financial situation was already in a downward spiral. Given these facts, it was clear to the court that Mortensen was trying to protect his property from known creditors - a big no-no in asset protection law. One of the key principles in asset protection planning is that you must do such planning well before there is a specific creditor in mind from whom you are trying to protect your assets.

Does this mean that DAPT’s are useless? No, I don’t think so. Many attorneys maintain that DAPTs continue to be very useful tools for asset protection. However, they point out that the Mortensen case is a good example of why anyone who wants to engage in asset protection should seek out and rely on an attorney experienced in this area of law. It has been reported that Mortensen did not employ an attorney when setting up his trust, nor did he hire an attorney before filing for bankruptcy. Had he done so, any reasonably competent asset protection or bankruptcy attorney could have warned him that filing for bankruptcy within that 10 year period of setting up his trust would “blow up” the trust and expose the assets in the trust to his creditors.

Solid asset protection planning can involve a significant investment of time and money. But if it is done right and is well maintained, it can be very effective in preventing unscrupulous individuals from unfairly accessing your wealth.


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