A domestic asset protection trust can potentially shield assets from creditors, including plaintiffs who receive a judgment awarding payment from the trust creator. Since New Mexico does not provide statutory protections for these types of trusts, the domestic asset protection trust will have to be created in another state’s jurisdiction, such as Nevada, Delaware, Alaska, etc.
Setting up a trust to safeguard prized assets can be a smart strategy, especially for individuals who operate in highly litigious career circles, such as doctors, attorneys, engineers, and those in the construction or landscaping industry. However, you will want to make sure that the trust is structured in a way that provides the protections you want without risking the assets themselves in the process.
Reach out to an Albuquerque domestic asset protection trust lawyer to discuss your options and begin planning for the trust that could be right for you. Schedule a confidential consultation with no obligation when you call New Mexico Financial & Family Law today at (505) 503-1637 or contact us online.
The assets you have built up over your lifetime are understandably precious. The last thing you want is to risk losing them to an aggressive creditor or litigator.
An Albuquerque domestic asset protection trust could provide you with the protections you need to feel secure, but you have to put in due diligence to obtain these protections. Hiring an Albuquerque domestic asset protection trust lawyer can ensure that you fully examine your options. Then, you can commit to one with confidence, knowing that you have a partner to structure your trust so that it can capitalize on every legal advantage available.
Without experienced help, your domestic asset protection trust could face unexpected risks or a successful creditor challenge. Avoid jeopardizing your hard-earned assets, and prepare for a broad range of possible scenarios by leaning on the guidance of an experienced attorney team.
When you come to New Mexico Financial & Family Law, we can assist you with every aspect of domestic asset protection trust creation. Your Albuquerque domestic asset protection trust attorney can provide personalized assistance through all of the following essential steps:
As you can see, there are many important duties involved in the creation of an Albuquerque domestic asset protection trust. There may be additional considerations on top of what we have listed above, depending on your situation and what you intend to get out of your trust.
Fortunately, you can rely upon our Albuquerque domestic asset protection trust law firm every step along the way. With our assistance and advice, you can enjoy peace of mind, knowing that the trust you create has a high chance of helping you fully succeed in all of your goals.
Like other trusts, a domestic asset protection trust is formed when the grantor (the creator of the trust) transfers ownership of assets to the trust. A trustee then assumes control of the trust.
The trustee must follow all instructions and guiding rules set by the grantor. They have a fiduciary duty to obey these rules, including a requirement to distribute trust assets to beneficiaries.
The trustee is also accountable for the responsible management of the trust’s assets. That could mean managing a stock portfolio or even hiring maintenance crews to take care of a piece of property owned by the trust.
Distributions can be paid out to beneficiaries according to a set schedule, or they can be made at the full discretion of the trustee. For example, the trustee may have instructions to pay out a substantial portion of a trust’s annual income to all beneficiaries, if the trust is able to achieve net growth beyond a certain percentage in a given year.
At the very least, there must be at least one beneficiary. This beneficiary must be available to receive the contents of the trust when the term of the trust expires, such as after the death of the grantor.
One key feature of the domestic asset protection trust is that they are always irrevocable. Once assets are transferred into the trust, they cannot be recovered in full by the grantor, except under certain conditions.
For example, the assets (or their equivalent value, adjusted for growth) may convert back to the grantor’s ownership after a certain number of years.
Otherwise, the trustee has discretion over how the assets are managed, and they are accountable to all beneficiaries regarding the way the assets are handled.
The irrevocable quality of domestic asset protection trusts is what allows them to offer their robust protections. Because the grantor no longer retains ownership over the assets and has no legal right to their unrestricted release back into their hands, the grantor cannot realistically access the assets in response to a creditor claim or court ruling.
Another key quality of domestic asset protection trusts is that the grantor has to essentially remove their control and power over the assets. As such, the grantor is discouraged from serving as trustee.
In fact, most states do not allow the grantor to serve as trustee if the trust is supposed to offer asset protections.
In any case, the grantor should not want to serve as trustee because the goal is to remove their power and control over the assets. In the event of a claim against their estate, the grantor needs to be able to state that they cannot reasonably access the assets held in trust.
Ideally, any assets held in the domestic asset protection trust will have a physical presence or at least some tangible connection to the state where the trust was created.
Technically, there are no rules requiring that the assets have this quality, in most states, but being consistent on this matter can allow for more robust protections.
For example, a grantor should feel discouraged from placing the title to a property located in New Mexico within a Nevada domestic asset protection trust. Likewise, any closely held business property, such as equity in a partnership, should be for a business located in — or at least somewhat active within — the state where the trust was formed.
Note that these criteria need not apply to an asset that could easily relate to any state, such as publicly traded stock or a life insurance policy furnished by a national provider. Further, many states do not require that the asset be physically located there for its connection to the trust to be legitimate.
Instead, grantors should merely feel discouraged from including physical property (or property that has a connection to a physical entity, like a brick-and-mortar business) in their trust if it has a stronger connection to another state. Otherwise, the property’s legitimate ownership by and control under the trust could be challenged.
Notably, New Mexico law does not offer statutory protection for assets held in certain types of irrevocable trusts. Instead, you may wish to form your domestic asset protection trust in another state with more favorable laws.
As of 2025, 20 states have some form of domestic asset protection available through a trust arrangement. These states are:
Of these, Nevada is considered by legal and trust experts to have some of the strongest asset protections in the country. Unlike most other states, for example, Nevada has a history of not enforcing judgments stemming from divorces or child support claims when it comes to permitting access to an irrevocable and non-grantor-controlled trust.
Alaska, Delaware, South Dakota, and Utah also have a reputation for strong asset protections.
Refer to your attorney for guidance on which state has laws and conditions that could be seen as most favorable to your specific asset protection goals.
One important thing to keep in mind is that a domestic asset protection trust is supposed to be used to protect against future claims.
You should never try to use a trust to guard assets that may be claimed by someone for a legal action that you know is already in progress. In addition, you should avoid removing assets that could be sought under a claim that is very likely to proceed, such as a malpractice lawsuit you could anticipate happening based on a recent incident.
To account for the “reasonably foreseeable” test, many states implement a statutory delay on protections for assets held in an irrevocable trust. Nevada law, for example, allows for claims against the trust to proceed for up to two years after the trust was formed, just in case there were pending legal actions that would have affected the assets placed inside the trust.
Grantors can sometimes shorten the statute of limitations period by making public notice of their transfer of assets into the trust in the state where the trust is being formed. These disclosures allow them to argue that any possible claimants should have reasonably been able to deduce that they have a limited time to seek recovery of assets allegedly owed to them.
All income generated within a trust must be taxed. Irrevocable trusts pay taxes on their own income, aside from any amount that is transferred to beneficiaries.
Beneficiaries are required to report all distributions from the trust as taxable income. They will pay the appropriate tax rate, depending on how the income was generated — e.g., short-term capital gains vs qualified dividends.
The IRS is allowed to pursue assets in a domestic asset protection trust if the trust itself is found in violation of its requirement to pay appropriate taxes.
The strongest asset protections are granted to trusts where the trustee is given absolute discretion over all matters. What this means is that the trustee is not required to pay out a distribution to beneficiaries while the trust remains active.
Instead, they might be recommended to pay a distribution, based on an ascertainable standard.
Giving a trustee sole discretion could create the risk of trustee indiscretion. Beneficiaries have legal standing to sue the trustee for breach of fiduciary duty, however, in the event that they feel the trust is being mismanaged.
In addition, the grantor (or any beneficiaries) can appoint a trust protector. This separate role is responsible for monitoring the trustee and ensuring their actions are consistent with the best interests of beneficiaries, as well as the trust as a whole.
Protecting assets is never easy, but it can be well worth the effort, especially if you are in a profession with a high risk of substantial liability. At New Mexico Financial & Family Law, we want to help you guard against those risks — while minimizing the risks that could result when you remove assets from your control.
Our Albuquerque trust law firm seeks to strike the perfect balance, helping you guard your most precious assets against creditor claims or other threats that could disrupt your best-laid plans.
Take steps to secure your legacy and protect your most valuable assets when you call (505) 503-1637 or contact us online to schedule a confidential consultation with no obligation.
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