Why Asset Protection Planning is More Critical Than Ever
In today’s uncertain world, asset protection strategies must continuously evolve to shield business owners, real estate investors, medical professionals, and high-net-worth individuals from lawsuits, creditors, and financial risks.
When Bob Dylan wrote “The Times They Are A-Changin’,” he captured the essence of adaptation—a concept that also applies to asset protection law. From the 1980s real estate crash to the rise of offshore trusts, and now the Bridge Trust®, the evolution of asset protection planning demonstrates why outdated strategies no longer work.
A Brief History of Asset Protection: How It All Began
The 1980s: The Birth of Modern Asset Protection
The 1980s marked a turning point in asset protection. As Dylan’s lyrics suggested, the financial world was undergoing a seismic shift. Real estate investors and developers leveraged Limited Partnerships (LPs) to pool resources and maximize tax advantages. But everything changed in 1986, when Reagan’s tax reforms eliminated many benefits, triggering a real estate market crash.
Banks demanded loan repayments, and financially strapped partners faced legal battles. However, attorneys discovered that Limited Partnerships (LPs) had a hidden advantage:
✔ LPs shielded assets from creditors through charging order protection.
✔ Creditors could only place a lien on distributions, not seize assets or force liquidation.
✔ Doctors, business owners, and real estate investors began using LPs for lawsuit protection.
This discovery sparked the birth of asset protection planning as a distinct legal strategy.
The Rise of Family Limited Partnerships (FLPs)
As Limited Partnerships (LPs) gained popularity, wealthy families adapted them into Family Limited Partnerships (FLPs) for estate planning and wealth protection.
Legal Attacks Against FLPs
By the 1990s, court cases such as Crocker Bank (1989) and Hellman (1991) in California challenged FLPs, arguing that:
• FLPs lacked arm’s-length business relationships.
• Many FLPs held liquid assets, making them easy to seize.
• Lawmakers never intended FLPs to function as lawsuit shields.
These cases weakened FLP protections, forcing asset protection attorneys to develop stronger, more secure strategies.
The Offshore Asset Protection Boom: Foreign Trusts Take Over
By the mid-1990s, asset protection law firms turned to offshore trusts, creating Foreign Asset Protection Trusts (FAPTs).
Why Offshore Trusts Became the Gold Standard
✔ Removed assets from U.S. court jurisdiction.
✔ Strengthened lawsuit and creditor protection.
✔ Limited court-ordered asset seizures.
The Cook Islands: A Safe Haven for Asset Protection
In 1989, the Cook Islands established itself as the premier jurisdiction for FAPTs, followed by Belize, Nevis, and The Bahamas. Offshore trusts became the strongest asset protection tool—but they had their own drawbacks.
The Downsides of Offshore Trusts
❌ Expensive to establish & maintain ($10,000–$50,000+ annually).
❌ Strict IRS reporting requirements (Forms 3520 & 3520-A).
❌ No Control.
Although properly structured offshore trusts are 100% legal, their complexity and cost left many professionals searching for a simpler solution.
The U.S. Response: Domestic Asset Protection Trusts (DAPTs)
In 1998, Alaska became the first U.S. state to pass Domestic Asset Protection Trust (DAPT) laws. Today, 19 states allow DAPTs, providing a domestic alternative to offshore trusts.
Key Weakness of DAPTs: U.S. Legal Vulnerability
Despite their benefits, DAPTs remain vulnerable to U.S. court rulings under the Full Faith and Credit Clause.
✔ Courts in non-DAPT states can challenge them.
✔ Judgment creditors have successfully breached them in several cases:
• Battley vs. Mortensen (2011)
• Kilker vs. Stillman (2012)
• Dahl vs. Dahl (2015)
• Toni 1 Trust vs. Wacker (2018)
These legal attacks exposed DAPTs’ weaknesses, leading to the development of a stronger hybrid solution.
The Bridge Trust®: The Future of Asset Protection
As Bob Dylan wrote, “Admit that the waters around you have grown,” highlighting the need to adapt to changing realities.
Enter the Bridge Trust®, created by Douglas Lodmell 30 years ago, a leading asset protection attorney.
What Makes the Bridge Trust® Unique?
✔ Combines offshore trust strength with domestic trust simplicity.
✔ Internationally registered from day one for maximum protection.
✔ Bridged back to the U.S. for tax and administrative ease.
✔ Converts to full offshore status when needed by breaking the bridge.
Why Mark and Sarah Chose the Bridge Trust®
Mark, a surgeon, and Sarah, a real estate developer, needed bulletproof asset protection.
✔ Mark’s Risk: Medical malpractice lawsuits.
✔ Sarah’s Risk: Tenant lawsuits & partnership disputes.
They rejected DAPTs due to their legal vulnerabilities. Instead, they implemented the Bridge Trust®, ensuring:
✔ Assets remain protected from creditors.
✔ No IRS offshore trust compliance burden (unless the bridge is broken).
✔ Maximum lawsuit protection while keeping assets legally accessible.
Key Takeaways: The Evolution of Asset Protection
✔ Limited Partnerships (LPs) and Family Limited Partnerships (FLPs) were the first asset protection tools.
✔ Foreign Asset Protection Trusts (FAPTs) provide the strongest protection but are expensive.
✔ Domestic Asset Protection Trusts (DAPTs) offer some protection, but courts have breached them repeatedly.
✔ The Bridge Trust® combines offshore security with domestic simplicity, creating the best asset protection strategy available today.
Conclusion: Is Your Asset Protection Strategy Outdated?
Bob Dylan’s lyrics remind us that change is inevitable—and so is the evolution of asset protection law.
With ever-changing laws, lawsuits, and economic instability, you need the most effective asset protection strategy available today. Whether you’re a business owner, real estate investor, or high-net-worth individual, the Bridge Trust® offers the strongest protection without unnecessary complexity.
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