Clearing the Air on Wyoming Trusts, and other Asset Protection tools: What Clients in NY, NJ, and FL Need to Know

Lately, we have had a surge of questions from clients who are hearing about “asset protection trusts” on social media or through well-meaning friends. The buzzwords are everywhere: "Wyoming Trust," "Nevada DAPT," "irrevocable trust for yourself." And while the interest in asset protection is entirely valid, especially in today’s litigious and uncertain world, there is a lot of confusion about what is possible, what is advisable, and what is truly effective and beneficial to clients.

Let’s clear the air and walk through what asset protection looks like in the real world, particularly if you live in New York, New Jersey, or Florida.

What Is a Domestic Asset Protection Trust (DAPT)?

A Domestic Asset Protection Trust (DAPT) is a type of irrevocable trust that allows you to be the beneficiary of the trust you create, while still (theoretically) protecting the assets in that trust from creditors.

Several states, including Wyoming, Nevada, South Dakota, and Delaware, have laws that explicitly allow these types of trusts. In these jurisdictions, if the trust is properly set up and administered, a creditor generally cannot reach assets in the trust, even though you may still benefit from them.

Sounds great, right? Here's the catch: not every state recognizes these protections, and implementing them also comes with complexity and cost.

NY, NJ, and FL: No Protection for Self-Settled Trusts

In New York, New Jersey, and Florida, the law is pretty clear: you cannot shield your own assets from your creditors by placing them in a trust for your own benefit. These states follow the traditional rule that what are known as self-settled spendthrift trusts are void since they are against public policy.

So this means that even if you set up a trust in, for example, Wyoming under Wyoming law, with a Wyoming trustee and follow all Wyoming's rules, if you live in New York, New Jersey, or Florida (or any other of the majority of states that take the same position), your local courts may disregard that trust when a creditor comes for you. They can essentially say: "Sure, we understand Wyoming law, but here in New Jersey, we apply our own law , and under our law, you cannot protect assets from your own creditors this way."

This risk is particularly high if the assets are physically located in your home state, say, a house in New Jersey or rental property in Brooklyn. This is because real property is governed by the law of the state in which it sits, and a New Jersey or New York court won’t need to defer to Wyoming law to decide whether that NYC brownstone is subject to your creditors' claims.

Specific Considerations for New Yorkers: Beneficial Ownership Transparency

For clients in New York especially, it's important to understand that beneficial ownership laws are tightening. In 2023, the New York LLC Transparency Act (NYLTA) was signed into law and, after some amendments, will take effect on January 1, 2026. Under the NYLTA, all LLCs formed or authorized to do business in New York will be required to disclose the identities of their beneficial owners to the New York Department of State.

This applies to both domestic and foreign LLCs and will affect many real estate ownership structures used by trusts and estate plans. While this information won’t be made public, it will be accessible to government and law enforcement agencies. Additionally, the federal Corporate Transparency Act (CTA), which took effect in 2024, already requires most small entities to report beneficial ownership information to FinCEN.

The enforceability and scope of these laws, particularly the CTA, are still evolving, especially in relation to trusts and layered ownership entities. We are closely tracking these developments and are happy to advise New Yorkers on how to comply with these rules while preserving your estate and asset planning goals.

In short, even if you place NYC property into a trust or LLC, your identity as the ultimate owner will likely need to be disclosed. Asset protection strategies that rely on anonymity are rapidly losing ground, at least in the Empire State.

Out-of-State Trusts Are Not Magic Bullets

Can you create a Wyoming trust if you live in New York, New Jersey, or Florida? Yes. But doing so comes with complexity:

1. You need a Wyoming trustee: This means naming either a Wyoming resident individual or a professional trust company licensed in Wyoming to serve as trustee. This isn’t just a box to check. The trustee must play an active role in administering the trust, which adds ongoing coordination and, in many cases, cost.

   
   

2. You must administer the trust from Wyoming: It is not enough to say your trust is governed by Wyoming law. For Wyoming's protections to apply, real administration, such as decision-making, recordkeeping, and meetings, must happen in Wyoming. Any sign that control is actually exercised from another jurisdiction could work to undermine the entire structure.

   
   

3. It can be expensive: Costs include paying for a Wyoming trustee, potentially a Wyoming registered agent, annual compliance filings, and professional advisors both locally and in Wyoming. This is in addition to any fees to form and maintain related LLCs or investment entities so these costs may be justifiable for high-net-worth families, but not necessarily for those with more modest assets.

   
   

4. It's risky: Even if you do everything right, a home state court may still refuse to honor the asset protection provisions of a Wyoming or other out-of-state trust. This is especially likely when the creditor, the assets, or the litigation at issue is based in your home state. Courts in NY, NJ, and FL have the discretion to apply their own public policy rules, which generally can invalidate self-settled spendthrift trusts.

   
   

Unless you have a substantial amount of wealth, and you are dealing with sophisticated estate planning or litigation exposure, it often makes more sense to plan within your home state using a suite of irrevocable trusts, LLCs, and other tools that are easier to administer and more likely to be respected by local courts.

Realistic Alternatives for Clients in NY, NJ, and FL

So what can you do instead?

• Use Irrevocable Trusts Strategically: While it is generally difficult to protect your own assets from creditors by creating a trust for your own benefit, you can transfer assets to a properly structured trust that benefits your spouse, children, or other loved ones. These trusts, when correctly drafted and funded, can remove assets from your personal ownership and estate, providing insulation from future claims while also achieving long-term estate planning goals such as tax efficiency, legacy planning, and control over distributions. Depending on the structure, these trusts can also allow for professional management of assets, oversight provisions, and flexibility in dealing with changing family circumstances. However, they must be established before a creditor problem arises. Transfers made in anticipation of litigation or debt may be challenged as fraudulent conveyances.

  
  

• Marital Agreements: For married individuals, consider pre- or post-nuptial agreements that separate certain assets from marital claims. While our firm does not practice in the area of family law at the moment, we work with several excellent attorneys and would be happy to recommend someone for you to speak to if you are considering these types of arrangements.

  
  

• Homestead Exemptions: Florida offers one of the most powerful homestead exemptions in the country, providing protection for a primary residence against most creditor claims, subject to certain acreage and residency requirements. In contrast, New Jersey has no state-level homestead exemption for creditor protection, although federal bankruptcy exemptions may apply in certain cases. New York provides a limited homestead exemption that protects a certain amount of equity in your primary residence, which varies by county—ranging from $89,975 to $179,950 as of 2025. While these exemptions are valuable tools in planning, they are not a substitute for comprehensive asset protection and must be considered in light of your full financial and legal picture.

  
  

• Business Entity Structuring: Holding assets through LLCs or limited partnerships can reduce liability exposure. For many clients concerned about personal liability or creditor claims, transferring interests into LLCs can achieve most of the protection they’re seeking, so long as the LLC is properly formed, adequately capitalized, and run according to standard business formalities. Courts may disregard the LLC structure if it's treated as a personal bank account or if records are incomplete, but when managed correctly, LLCs can offer strong protection against personal claims that do not arise from the LLC's own operations.

  
  

• Umbrella Insurance: Although we don’t advise clients on specific types of amounts of insurance to consider, we do emphasize that liability insurance, including umbrella policies, can be a valuable part of a comprehensive asset protection strategy. When paired with proper entity structuring and estate planning, insurance may help address certain risks more efficiently than complex trust setups. That said, we always recommend reviewing your coverage needs with a qualified insurance advisor as part of your broader planning discussions.

Final Thought: Substance Over Hype

Asset protection is a legitimate goal, and we work with clients every day to create real, durable plans tailored to their needs. But the trend of chasing a “Wyoming trust” because of something seen on TikTok or YouTube can backfire. The law is nuanced, and the best strategies are those that account for the jurisdiction you actually live in, the assets you actually own, and the legal environment that governs them.

Out-of-state trusts may have their place, but only where the facts, the funding, and the follow-through make them worthwhile. For most clients in New York, New Jersey, or Florida, the better path is a home-grown solution that’s legally sound, cost-effective, and easier to administer.

If you have assets, you should be interested in these issues, so let’s talk. Click here to schedule a 15-minute call to learn more.