Why Foreign Asset Protection Trusts Remain the Gold Standard in Asset Protection.

Recent commentary has been published asserting that “29 failed Foreign Asset Protection Trust (FAPT) cases” prove Domestic Asset Protection Trusts (DAPTs) — are superior. While the list seems impressive at first glance, a closer analysis reveals that the conclusion simply does not hold when one separates poor planning and bad facts from the actual legal strength of FAPTs.

The truth is straightforward:

• Every one of the 29 cited failures is either a case of egregious settlor misconduct, fraudulent transfers, or retained control — factors that will compromise any trust structure, foreign or domestic.
• In uncontested, properly implemented cases, FAPTs remain undefeated in compelling an offshore trustee to hand over assets to a U.S. court.
• When compared head-to-head in real litigation, a properly timed and executed FAPT is still vastly stronger than any DAPT.

Let’s unpack the facts.

1. The “29 Failed Cases” Are Not Failures of FAPT Law — They Are Failures of Execution

The cited cases fall into a few predictable categories:

1. Retained Control / Self-Created Impossibility
   These involve situations where the settlor blatantly retained power over the trust or manufactured an “impossibility” defense while clearly still controlling the assets. FTC v. Affordable Media (Anderson) is the poster child — the debtors served as Protectors, repeatedly lied under oath, and kept the power to repatriate. No serious FAPT practitioner today structures a trust this way.
2. Fraudulent Transfers Made After Trouble Began
   Moving assets offshore after a lawsuit is filed, judgment is entered, or bankruptcy is imminent is a recipe for losing — under both foreign and domestic law. The cited cases like In re Portnoy and Fortney v. Kuipers didn’t fail because the trust was offshore; they failed because the transfers were obviously fraudulent.
3. Criminal Conduct / Divorce / Tax Fraud
   Courts are far less sympathetic — and sometimes entirely unforgiving — when the underlying obligation is a criminal fine, restitution order, or marital property division. In these situations, a DAPT would not have survived either.
4. U.S. Contempt Power Over the Debtor
   This is perhaps the most misunderstood point. In every case where a U.S. court jailed a debtor, the court did not compel the offshore trustee to release the funds — because it couldn’t. Instead, it pressured the debtor through incarceration. The trust itself did its job: the assets stayed offshore. The choice to sit in contempt or to repatriate is a human choice, not a legal failure of the trust.

2. The Real Track Record of Properly Planned FAPTs

The absence of case law showing a court compelling an independent foreign trustee to turn over assets is not accidental — it is the very evidence of FAPT superiority.

Key facts:

• Cook Islands, Nevis, and Belize trust law explicitly reject U.S. judgments and require creditors to start fresh in their courts — often with short limitation periods, high proof burdens, and “loser pays” rules.
• A properly drafted FAPT uses an independent foreign trustee and eliminates settlor powers that U.S. courts could construe as “control.”
• In the real world, creditors almost always settle on far more favorable terms once they understand they must litigate offshore. This leverage is the point.

3. Why DAPTs — Remain Legally Vulnerable

Proponents of DAPTs tout a “better track record” largely because there are fewer reported DAPT cases — not because the law is more protective.

The structural vulnerabilities are significant:

• Full Faith and Credit Clause & Supremacy Clause: U.S. courts can and do apply the law of the debtor’s home state (non-DAPT state) over the law of the DAPT jurisdiction. This is exactly what happened in Huber, and despite arguments about dicta, many courts agree.
• Uniform Voidable Transactions Act: Fraudulent transfer law applies equally to DAPTs, and unlike FAPTs, creditors don’t face the hurdle of a foreign forum.
• Domestic Trustee Jurisdiction: A domestic trustee is always subject to U.S. court orders. There is no jurisdictional firewall.

4. The Contempt Argument Misunderstood

Critics of FAPTs love to cite cases where debtors “sat in jail for years” as proof the trust failed. This is upside down.

• The trust worked: the assets stayed offshore, out of creditor reach.
• Contempt jail is a coercive tool, not a transfer order. The debtor chooses between freedom and asset surrender.
• In many cases, debtors overplayed their hand or refused to negotiate, leading to prolonged incarceration. That is a strategic failure, not a legal one.

In fact, the credible possibility of indefinite contempt adds leverage for pre-trial settlement. Skilled planning anticipates this dynamic and resolves cases before it reaches that stage.

5. Why FAPTs Remain the Gold Standard

When done right — meaning:

• Assets transferred well before creditor issues arise,
• An independent foreign trustee in a jurisdiction with favorable law,
• No retained control or powers of appointment that invite U.S. court reach,
• Integration with domestic entities for tax compliance and management flexibility,

…a FAPT offers the highest level of judgment-proofing available under current law.

It is not invincible — nothing is — but it creates the steepest litigation hill for a creditor to climb. By contrast, DAPTs keep the battle on U.S. soil, within reach of U.S. judges, and under the influence of U.S. public policy.

Conclusion

The “29 failed FAPT cases” are not evidence that FAPTs don’t work. They are a cautionary tale that sloppy, last-minute, or fraudulent transfers will fail no matter the jurisdiction. The actual legal firewall of a properly executed FAPT remains intact and undefeated in forcing a foreign trustee to hand over trust assets pursuant to a U.S. judgment.

This is true when the trust is done either as an FAPT from the get go, or as a Bridge Trust, where the trust is registered offshore from day one and then technically bridged back to meet IRS requirements to be treated as a foreign trust.

DAPTs have their place — particularly for smaller estates, in-state residents, or as part of layered domestic/offshore planning — but they do not match the deterrence, jurisdictional insulation, and proven track record of a correctly implemented Foreign Asset Protection Trust.

In asset protection, venue is everything. And the best venue is still 7,000 miles away.

If you have any further questions about your fee, or about anything in this article or your planning, please do not hesitate to contact us directly at [e-mail] or 602-230-2014.