In today’s digital world, the path to accumulating wealth can look quite different from what it did just a few decades ago. Many modern-day investors are no longer confining themselves to traditional stocks and bonds, but encompassing cryptocurrencies and other digital assets as a valuable store of wealth within their portfolios.
While the opportunity to profit can be significant in this arena, the inherent volatility associated with digital assets is just one of the risks presented by such ownership. In addition to the potential for hacking and other cyber threats that exist in this domain, the loss of a private key can spell disaster, resulting in permanent loss of access to those assets.
However, investors should not only seek to protect their digital assets from these risks but also those posed by potential creditors, ex-spouses, lawsuits and judgments. In this article, we will explore strategies to help individuals safeguard their digital assets, and preserve their overall wealth.
Domestic Asset Protection Trust
A domestic asset protection trust, or ‘DAPT’ is an irrevocable trust that enables individuals to safeguard their digital assets from various creditors who may seek a claim over them. By placing them into this trust, ownership and direct control over the assets is transferred to the trust, effectively shielding them from legal claims.
While you may not control those assets directly anymore, you can still benefit from them under the terms of the trust, without the worry of any creditors trying to access or seize them. Currently, 17 states in the U.S. allow the establishment of a DAPT including Alaska, Delaware, Michigan, Mississippi, Nevada, and West Virginia.
Nevada Asset Protection Trust
A Nevada asset protection trust, or ‘NAPT’, is a type of Nevada trust that allows you to protect your digital assets and wealth from creditors, lawsuits, and judgments. As with a DAPT, this is an irrevocable trust that enables you to continue to benefit from the assets by naming yourself as a beneficiary while ensuring those assets remain protected from creditors.
While the two types of trust structures offer protection for digital assets, the State of Nevada is regarded as having the strongest asset protection laws in the country making a NAPT a popular choice for individuals seeking to safeguard their assets.
Offshore Trust
An offshore trust can provide the highest amount of protection for investors looking to safeguard their digital assets. Since they are established beyond the jurisdiction of U.S. authorities, they cannot be easily accessed or seized by U.S. creditors or legal claims.
Without the help of national courts, a potential creditor must pursue a claim in the jurisdiction in which the trust is established. This can be a costly and time-consuming endeavor and one that requires overcoming complex legal hurdles. As a result, offshore trusts can potentially offer a robust and secure form of asset protection for individuals looking to protect their digital assets. Common offshore trust jurisdictions include the Bahamas, Belize, Nevis, the Cook Islands, and the Cayman Islands.
By using the strategies outlined, investors can ensure their digital assets are shielded from creditors and given the protection they need.
