The process involved in setting up an Asset Protection Trust is to have an experienced and skilful lawyer draft the Trust Agreement in accordance with Nevada law, for example.  It is recommended that a professional Nevada Trustee be utilized as the Trustee of the Trust.  Nevada has a very favorable statute of limitations which provides that a creditor may only bring an action against the Trust within two years after the transfer to the Trust or six months after the creditor discovers or reasonably should have discovered the transfer, whichever is later.

With respect to the asset protection strategy and planning, relative to limited partnerships, it is important to understand that both the limited partner interest, as well as the controlling general partner interest, needs to be protected. In a limited partnership the general partner is personally liable and does not have the charging order protection. Therefore, the general partner should have the smallest possible interest. But this interest also needs to be protected because if the creditor obtains control of the general partner interest, it can possibly order distribution of the assets to the creditor by dissolving the partnership.

Accordingly, to protect both the general partner and the limited partner interest, it may be appropriate to form a corporation to act as the general partner and have an offshore asset protection trust hold the limited partner interest. Since the general partner makes all partnership decisions including the right to make or not make distributions and the right to dissolve the partnership, it is important that the creditor of a limited partner not have the ability to gain control of the general partner. Therefore, normally, the transferor client should not be the general partner.

It would seem that the best method of protecting the general partner interest is to form a new corporation, LLC or even another Limited Partnership and have it act as the general partner. Preferably, the client should not own the stock of the corporation general partner or the member interest of the LLC general partner. The general partner corporation can be domiciled in an offshore debtor friendly jurisdiction. An election can be made with the IRS to have the offshore corporation treated as a domestic entity in order to avoid negative foreign corporation tax consequences. It may be even possible to have a partnership of offshore corporations be the general partner so that a creditor would have to penetrate more than one offshore jurisdiction at the same time.