[2] Assets that are shielded from creditors by law are few: common examples include some home equity, certain retirement plans and interests in LLCs and limited partnerships (and even these are not always unreachable).
The anti-alienation provision of the Employee Retirement Income Security Act of 1974 (ERISA) exempts from claims of creditors the assets of pension, profit-sharing, or 401(k) plans.
Two exceptions are carved out for qualified domestic relations orders and claims under the Federal Debt Collection Procedures Act of 1990.
Asset protection planning began to develop as a stand-alone area of the law in the late 1970s.
It began coming into prominence in the late 1980s, with the advent and the marketing of offshore asset protection trusts.
Colorado attorney Barry Engel is credited with the introduction of that concept and the development of asset protection trust law statutes in the Cook Islands.
A 2003 article in The Wall Street Journal claimed that 60% of America's millionaires have considered engaging in asset protection planning.
[7] Since 1997, the following states have adopted legislation allowing for a self-settled asset protection trust: Nevada, Delaware, South Dakota, Wyoming, Tennessee, Utah, Oklahoma, Colorado, Missouri, Rhode Island and New Hampshire.
This legislation created a favorable offshore asset protection trust jurisdiction also for non-US settlors.
[8] There is considerable debate about the comparative effectiveness of the asset protection provided by the laws of each jurisdiction, onshore and offshore.
Case law from North Carolina demonstrates the asset protection advantages of a transfer to a limited liability company (see Herring v. Keasler, 150 NC App 598 (01-1000) 06/04/2002).
On the other hand, most would agree that it is ethically inappropriate to assist a person to commit fraud or evade income taxes.
In some cases, individuals have gone to jail for contempt of court for failing to unwind a plan that a judge felt was repugnant to the principles of law and justice, however in those cases the individuals incarcerated retained some control over their plan immediately prior to, or during, litigation.