Florida residents who begin researching asset protection often run into an unfortunate reality. Florida does not have Domestic Asset Protection Trust legislation. Unlike the 17 or so states that permit self-settled asset protection trusts, Florida maintains a public policy position that makes these structures ineffective when formed under Florida law.
This does not mean Florida residents are without options. You can establish a DAPT in a state that authorizes them, such as Wyoming, Nevada, or South Dakota. However, doing so requires careful planning and an understanding of the complications that arise when a Florida resident uses another state’s trust laws.
Why Florida Prohibits Self-Settled Asset Protection Trusts
Under Florida law, if you create a trust and name yourself as a beneficiary, your creditors can reach whatever interest you have in that trust. This is the traditional common law rule that most states followed before DAPT legislation began appearing in the late 1990s.
Florida has not changed this rule. A trust established under Florida law and funded with your own assets remains fully reachable by creditors. It does not matter what you call the trust or how the documents are drafted. If you are both the grantor and a beneficiary, Florida offers no protection.
Establishing an Out-of-State DAPT as a Florida Resident
Florida residents are not prohibited from establishing a DAPT in a state that authorizes them. You can form a trust under Wyoming law, for example, even though you live in Florida.
To establish a valid out-of-state DAPT, the trust document must be drafted in conformity with the laws of the DAPT state. You must also have a trustee or trust company located in that state. The strength of your structure depends significantly on the connections between your trust and the DAPT state. If your trust is administered in Wyoming by a Wyoming trustee, with records maintained there and assets held there, you have a much stronger position than if Wyoming is merely named in the trust document with no real operational presence.
The Conflict of Laws Question
The central uncertainty for Florida residents using out-of-state DAPTs is which state’s law will apply if the trust is ever challenged. Will a court respect the laws of the DAPT state, or will it apply Florida law and allow creditors to reach your assets?
Florida courts have historically been hostile to self-settled trusts regardless of where they are formed. Some practitioners argue that Florida courts will simply apply Florida law and disregard the protections offered by the DAPT state.
Other practitioners believe that with proper structuring and genuine connections to the DAPT state, the trust can be effective. The reality is that limited case law directly addresses this question. Most asset protection disputes settle before trial, which means we have few court decisions to guide predictions. This uncertainty is something Florida residents must accept when pursuing out-of-state DAPTs.
Why Wyoming Works for Florida Residents
Wyoming offers several features that make it attractive for Florida residents seeking asset protection.
The private family trust company structure allows you to maintain meaningful control over trust investments and business decisions. In most states, you would need to hand control to a bank or institutional trustee. Banks move slowly, require extensive documentation, and have no knowledge of your particular business. Wyoming’s structure lets you form your own trust company that serves as trustee, with you serving as manager. Distributions remain discretionary through an independent distribution committee, preserving asset protection benefits.
Wyoming has no state income tax. The state’s courts are experienced with trust matters and understand small business dynamics. You do not need to visit Wyoming or relocate there to establish a trust, provided the trust has appropriate connections such as a Wyoming trustee.
Wyoming is also geographically remote and difficult to reach. This increases costs for creditors considering litigation there, which often encourages settlement rather than protracted court battles.
The Importance of Timing
A DAPT cannot be used to avoid liability for claims that already exist. Fraudulent transfer laws apply in every state, allowing creditors to unwind transfers made with intent to defraud or made when you were already insolvent.
If you have known creditors, pending litigation, or reasonably foreseeable claims, establishing a DAPT will not protect the assets you transfer. The creditor can pursue a fraudulent transfer action and pull those assets back out of the trust.
The time to plan is before any threat arises. If you wait until you are facing a lawsuit or divorce, it is too late to achieve meaningful protection. Planning works. Reacting rarely does.
What Florida Residents Should Consider
Florida residents face a more complex path to asset protection than residents of DAPT states. The uncertainty about how Florida courts will treat out-of-state DAPTs is real, and no honest practitioner can guarantee that your trust will withstand every possible challenge.
However, a properly structured DAPT with genuine connections to a favorable jurisdiction like Wyoming can still provide significant benefits. Even if the protection is not absolute, the cost and difficulty of challenging a well-structured trust often encourages creditors to settle for far less than they might otherwise demand.
This is a nuanced area with significant complexity, and the right approach depends on your specific circumstances. For guidance tailored to your situation, consider consulting experienced counsel like Mark Pierce and Matt Meuli at Wyoming Asset Protection Attorney to evaluate whether an out-of-state DAPT makes sense for you.