Dr. James Carter was a cardiothoracic surgeon in Manhattan with six investment properties across Brooklyn and Queens and a net worth just over $8 million. Over the previous decade he had built what most people would consider a success story: a thriving surgical practice, equity in several New York City properties, and a growing investment portfolio.
Five years before the lawsuits arrived, he had done what his estate planning attorney recommended. He funded an irrevocable trust with his investment properties and created a single-member LLC for each property.
He believed he was protected.
He was not.
When a malpractice claim produced a $4.2 million judgment and a tenant personal-injury lawsuit followed eighteen months later, the creditors’ attorneys examined his financial structure and found nothing that slowed them down. The irrevocable trust was self-settled — Carter had created it and remained a beneficiary — and under New York Estates, Powers and Trusts Law §7-3.1(a) that meant creditors could reach it. His single-member LLCs were exposed to turnover under CPLR §5225. And because the trust had been funded within the four-year fraudulent-transfer window, creditors argued that the transfers were voidable.
His attorney had built an estate plan.
What he needed was an asset protection structure.
What his estate attorney never addressed was that New York real estate creates a specific liability exposure that no domestic trust structure was designed to contain.
In New York, those are not the same thing — and the gap between them is where exposed wealth disappears.
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Why Domestic Planning Fails in New York
New York does not permit self-settled asset protection trusts. This is not a grey area in the law or a recent judicial trend. It is the explicit statutory rule.
EPTL §7-3.1(a) states:
“A disposition in trust for the use of the creator is void as against the existing or subsequent creditors of the creator.”
Translated into plain language:
If you create a trust and still benefit from it, your creditors can reach those assets.
New York courts have enforced this rule consistently for decades.
In Vanderbilt Credit Corp. v. Chase Manhattan Bank, 100 A.D.2d 544 (2d Dep’t 1984), the court confirmed that creditors may access whatever a trustee has the discretion to distribute to the settlor.
The form of the trust — whether it is irrevocable, contains a spendthrift clause, or uses complex drafting — does not change the underlying rule. Courts look at substance over form. If the settlor still benefits from the trust or retains control over it, the structure fails as creditor protection.
The New York State Bar Association reaffirmed in 2025 that New York does not recognize Domestic Asset Protection Trusts (DAPTs). Any advisor promoting a “New York asset protection trust” built on self-settled domestic law is either mistaken or misrepresenting what the law allows.
Why Out-of-State Trusts Often Fail
After discovering New York does not permit self-settled trusts, many professionals attempt to establish trusts in states such as Nevada, Delaware, or Wyoming.
Those states allow Domestic Asset Protection Trusts.
The assumption is that forming a trust elsewhere will import that state’s protective law.
For New York residents, that assumption often fails.
Courts focus on control and domicile, not simply the jurisdiction named in the trust document.
Several cases illustrate this pattern.
In In re Portnoy, 201 B.R. 685 (Bankr. S.D.N.Y. 1996), a bankruptcy court disregarded an offshore trust because the debtor retained effective control over the assets.
In In re Lawrence, 227 B.R. 907 (Bankr. S.D. Fla. 1998), the court rejected claims that a foreign trust prevented repatriation when the settlor retained the ability to influence the trustee.
And in In re Brooks, 217 B.R. 98 (Bankr. D. Conn. 1998), the court again focused on retained control rather than the jurisdiction where the trust had been formed.
Across these decisions the principle is consistent:
A trust where the settlor retains meaningful control will fail — regardless of where it was formed.
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The Turnover Power Unique to New York
New York introduces a second enforcement mechanism that dramatically expands creditor power.
In Koehler v. Bank of Bermuda, 12 N.Y.3d 533 (2009), the New York Court of Appeals held that once a New York court has personal jurisdiction over a judgment debtor, it may compel turnover of assets held anywhere in the world.
Under CPLR §5225, the court’s authority is tied to jurisdiction over the person, not the physical location of the asset.
This creates what practitioners often call the “global turnover” doctrine.
A New York court can order a debtor to produce assets located in another country if the debtor has the legal ability to do so.
For asset protection planning, that means the key question becomes:
Does the person subject to the court’s jurisdiction have the authority to produce the asset?
If the answer is yes, the court can compel turnover.
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Why LLCs Fail in New York
Many investors assume that placing assets in LLCs provides strong protection.
In New York, LLCs help contain operational liability — but they rarely protect personal wealth from a personal judgment.
New York courts do not limit creditors strictly to charging orders.
In 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589 (1st Dep’t 2022), a court allowed a creditor to seize a debtor’s LLC membership interest directly.
More recently, Rich v. J.A. Madison, LLC reaffirmed that courts may compel turnover and even sale of LLC interests.
Reverse veil-piercing also remains available. In State v. Easton, 647 N.Y.S.2d 904 (Sup. Ct. 1995), the court recognized circumstances where assets inside an entity could be reached to satisfy the owner’s personal debts.
For single-member LLCs, this exposure is particularly significant.
A creditor with a judgment against the owner can take the entire membership interest — including management control.
LLCs isolate operational risk, but they do not reliably shield personal wealth from personal liability.
The Fraudulent Transfer Framework
New York modernized its fraudulent-transfer statutes in 2020.
Under the revised New York Debtor and Creditor Law §§273–276, courts may void transfers made:
• with intent to hinder or delay creditors
• or without reasonably equivalent value while the debtor was insolvent.
These statutes typically allow creditors to examine transfers made within four years before litigation.
Courts analyze “badges of fraud,” including insider transfers, retention of control, and transfers made after litigation risk appears.
Asset protection planning implemented after a legal threat emerges is therefore highly vulnerable.
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The Structure That Addresses Timing, Control, and Jurisdiction
Effective planning must address three variables simultaneously:
Timing — the structure must exist before any claim arises.
Control — the person exposed to liability cannot retain authority over the assets.
Jurisdiction — the assets must be administered outside the authority of the court enforcing the judgment.
A layered structure is typically required to achieve this.
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The Three-Layer Structure
1. Asset-Level LLCs
Each property or operating asset is held in a separate LLC formed in the jurisdiction where the asset is located.
This isolates operational liability and prevents claims involving one asset from reaching others.
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2. Asset Management Limited Partnership (AMLP)
The LLC interests are held by an Arizona limited partnership.
Under A.R.S. §29-3503, the exclusive remedy against a limited partner’s interest is a charging order, confirmed in NextGear Capital v. Owens (Ariz. Ct. App. 2023).
A creditor receives only the right to distributions when the partnership chooses to make them.
The partnership has no obligation to distribute profits.
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3. The Bridge Trust®
The limited partnership interest is owned by the Bridge Trust®, a hybrid offshore trust structure.
For U.S. tax purposes the trust operates as a fully transparent grantor trust under IRC §§671–677 and §7701, meaning all income is reported on the settlor’s personal tax return.
Under normal circumstances the trust operates domestically.
If a genuine creditor threat arises, the Trust Protector may declare an Event of Duress, shifting administrative authority to an independent Cook Islands trustee according to the pre-existing terms of the governing instrument.
This is not a transfer of assets.
Ownership remains with the trust both before and after the declaration.
What changes is administration.
Cook Islands law imposes significant barriers to creditor litigation, including:
• non-recognition of foreign judgments
• a high burden of proof for fraudulent-transfer claims
• short limitation periods
• significant litigation costs and bond requirements.
These legal hurdles dramatically alter the economics of pursuing the claim.
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What This Would Have Meant for Dr. Carter
If Carter had implemented this structure five years before the malpractice claim arose, the enforcement picture would look very different.
His properties would be held in separate LLCs.
The LLC interests would be owned by the AMLP.
The AMLP interest would be owned by the Bridge Trust® administered by an independent Cook Islands trustee.
A creditor might still obtain a judgment.
But collecting on that judgment would become far more difficult.
And in litigation, collectability determines settlement economics.
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The Bottom Line
New York remains one of the most challenging jurisdictions in the United States for protecting personal wealth.
Domestic self-settled trusts fail under EPTL §7-3.1.
Out-of-state DAPTs often lose force when the settlor remains in New York.
LLCs alone rarely protect personal wealth from personal judgments.
Effective protection requires a structure built before any claim exists, where ownership, control, and jurisdiction are deliberately separated.
Asset protection is not about hiding assets.
It is about structuring ownership and jurisdiction before liability appears.
Because once litigation begins, the legal options available to protect wealth become dramatically narrower.
Structure before stress.
In New York, that is not advice — it is the only strategy that survives enforcement.
Don’t leave your assets exposed. Contact us today at (888) 773-9399 and talk with an asset protection attorney to learn how a tailored asset protection plan can safeguard your financial future.
By: Brian T. Bradley, Esq.
