Asset Protection Trusts in New York

For Manhattan clients with meaningful wealth and real exposure, whether from a profession, a business, or a high-visibility position, asset protection is not a luxury but a core planning discipline. New York law offers powerful, legitimate tools to insulate wealth from future creditors when they are implemented properly and in advance.

Protection Comes From Irrevocability

The defining principle of asset protection is that you generally cannot shield assets you still fully control. A revocable trust offers no creditor protection because its assets remain yours. Durable insulation comes from irrevocable structures in which you have relinquished ownership and command of the transferred property. Designing the right degree of relinquishment, while preserving as much flexibility as the law allows, is the heart of this work.

Spendthrift Trusts Under EPTL 7-1.5

New York recognizes spendthrift protection. Under EPTL 7-1.5, a beneficiary generally cannot transfer their interest in trust income, and creditors generally cannot reach that interest before it is distributed. For high-net-worth families, this means assets left in properly drafted trusts for children and grandchildren can be protected from those beneficiaries’ divorces, lawsuits, and creditors, an enormous advantage over outright gifts.

Irrevocable Trusts for the Grantor’s Wealth

For your own assets, an irrevocable trust funded by completed gifts can place wealth beyond the reach of your future creditors, provided the transfers are made when you are solvent and not to defraud existing or anticipated claimants. New York’s Debtor and Creditor Law governs fraudulent conveyances, and timing is decisive. Protection planned years before any claim is sound; transfers made under the shadow of a known creditor are vulnerable to being unwound.

Entity Layering and Coordination

Trusts rarely work in isolation for high-net-worth clients. We coordinate trusts with limited liability companies and limited partnerships that hold real estate and business interests, separating risky assets from safe ones and adding charging-order protection at the entity level. The trust then holds the entity interests, layering protection while maintaining workable governance.

Honoring the Spousal Right of Election

Asset protection planning for married clients must respect the surviving spouse’s right of election under EPTL 5-1.1-A, generally the greater of $50,000 or one-third of the augmented estate. Transfers to certain trusts can be drawn into the elective-share computation. We structure protective trusts with this rule in mind so a plan intended to preserve wealth does not collide with a spouse’s statutory entitlement.

What Asset Protection Is Not

Legitimate asset protection is not hiding assets and not evading existing debts or judgments. It is the lawful, advance arrangement of ownership so that wealth is held in resilient structures before any claim exists. Done correctly, it withstands scrutiny precisely because it is transparent and timely.

Building Your Protection Plan

Every protection plan begins with a candid assessment of your assets, your exposures, and your goals for family and philanthropy. From there we design a structure that balances security, control, and tax efficiency under New York law.

This is general information, not legal advice. Asset protection and fraudulent-conveyance rules are complex and fact-dependent. Please consult a licensed New York attorney before implementing any protection strategy.