There is No Place Like Home: Mature Foreign Asset Protection Trusts Are Coming Home
The 10-year time limit is expiring for a raft of foreign asset trusts, and those who hold them could benefit in several ways now by redomiciling them to the United States.
Do you have a foreign asset protection trust (FAPT)? Has it been established for more than 10 years? Are you interested in ways you can save on the costs of maintaining your FAPT? You may now bring your trust home to a qualifying state and still maintain the firewall protections your FAPT provided.
In recent years many FAPTs that have reached their 10-year anniversary are being migrated back to the United States. Why is the 10-year period so critical? Under a federal law pertaining to bankruptcy proceedings, the U.S. bankruptcy trustee is allowed to challenge transfers to a domestic asset protection trust or other similar devices for up to 10 years from the date assets were transferred to the trust. Once the 10-year term has expired, the trust is no longer at risk of being challenged as a fraudulent transfer in a bankruptcy proceeding.
The long statutory period to challenge transfers to asset protection trusts caused many people to establish these trusts in an overseas country where Federal Bankruptcy Code Section 548 would not apply.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The benefits of bringing a trust home
Once the statute of limitations under Section 548 has expired, a creditor is no longer able to pursue the assets held in the trust. This is great news, considering the FAPT can now return home! The many benefits of converting the FAPT to a domestic trust include:
- lower administration fees
- more flexibility in banking and investment custodians
- convenience
- less IRS tax compliance, i.e., less costs to maintain the trust
A real-life story
Here is a client example: Dr. Veronica G. developed a specific medical procedure to fix an ongoing condition and for several years she had successfully helped more than 75 patients overcome their medical issue. One day while watching the news, Dr. G. saw a commercial in which a law firm advertised that it would sue doctors who injured patients who had the procedure performed and who may have sustained injuries.
Dr. G. began to realize that although this procedure was successful, there could be some larger liability than her malpractice policy would cover. This prompted her to consult with a lawyer who specialized in comprehensive estate planning with asset protection and resulted in her establishing foreign asset protection trusts.
Dr. G.’s trust is now more than 10 years old, and after meeting with her attorney, she decided to redomicile her trust to Nevada, a state that year after year ranks in the top five of asset protection trust states. This strategy will maintain the protections of the trust while reducing Dr. G’s overall costs to maintain the trust. She won’t be required to file the IRS tax compliance forms required for trusts established overseas, and her choice of banks and brokerage firms will increase significantly, because many U.S. banks and brokerage firms will not open accountants under a FAPT.
Overall, the key concept is that if your FAPT is now more than 10 years old, you may now bring it back to the U.S. and still maintain the protections of the trust.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jeffrey M. Verdon, Esq. is the lead asset protection and tax partner at the national full-service law firm of Falcon Rappaport & Berkman. With more than 30 years of experience in designing and implementing integrated estate planning and asset protection structures, Mr. Verdon serves affluent families and successful business owners in solving their most complex and vexing estate tax, income tax, and asset protection goals and objectives. Over the past four years, he has contributed 25 articles to the Kiplinger Building Wealth online platform.
-
Social Security Wage Base Rises Again for 2026: Who Pays More Tax?Payroll Taxes The Social Security Administration has announced significant changes affecting millions as we approach a new year.
-
Quiz: How Well Do You Understand the Social Security Earnings Test?Quiz Test your basic knowledge of the Social Security earnings test in our quick quiz.
-
Debunking Three Myths About Defined Outcome ETFs (aka Buffered ETFs)Defined outcome ETFs offer a middle ground between traditional equity and fixed-income investments, helping provide downside protection and upside participation.
-
This Is Why Judge Judy Says Details Are Important in Contracts: This Contract Had HolesA couple's disastrous experience with reclaimed wood flooring led to safety hazards and a lesson in the critical importance of detailed contracts.
-
A Lesson From the School of Rock (and a Financial Adviser) as the Markets Go Around and AroundIt's hard to hold your nerve during a downturn, but next time the markets take a tumble, remember this quick rock 'n' roll tutorial and aim to stay invested.
-
I'm a Financial Pro: This Is How You Can Guide Your Heirs Through the Great Wealth TransferFocus on creating a clear estate plan, communicating your wishes early to avoid family conflict, leaving an ethical will with your values and wisdom and preparing them practically and emotionally.
-
To Reap the Full Benefits of Tax-Loss Harvesting, Consider This Investment Strategist's StepsTax-loss harvesting can offer more advantages for investors than tax relief. Over the long term, it can potentially help you maintain a robust portfolio and build wealth.
-
Social Security Wisdom From a Financial Adviser Receiving Benefits HimselfYou don't know what you don't know, and with Social Security, that can be a costly problem for retirees — one that can last a lifetime.
-
Take It From a Tax Expert: The True Measure of Your Retirement Readiness Isn't the Size of Your Nest EggA sizable nest egg is a good start, but your plan should include two to five years of basic expenses in conservative, liquid accounts as a buffer against market volatility, inflation and taxes.
-
New Opportunity Zone Rules Triple Tax Benefits for Rural Investments: Here's Your 2027 StrategyNew IRS guidance just reshaped the opportunity zone landscape for 2027. Here's what high-net-worth investors need to know about the enhanced rural benefits.