What is Wyoming’s “Cowboy Cocktail” for Asset Protection?

by Norris Law Group on August 18, 2014

What is Wyoming’s “Cowboy Cocktail” for Asset Protection?You may have heard of Wyoming’s “Cowboy Cocktail.” But it’s not something you can sidle up to a bar and order at one of the state’s many “watering holes.” For this particular “cocktail,” you’ll need an experienced Wyoming asset protection attorney.

The “Cowboy Cocktail” refers to Wyoming’s “double-barreled” approach to asset protection. Wyoming allows the combination of something known as a Domestic Asset Protection Trust (DAPT) and a Limited Liability Company (LLC). This combination provides complete asset protection, according to Mike Smith, founder of Smith Barid LLC in Savannah, GA.

Wyoming is only one of 12 states that offer DAPTs. A DAPT is an irrevocable, “spendthrift” trust, and is set up in a unique way. A grantor (or creator) of a Wyoming DAPT may be a beneficiary of the trust, but is not a trustee. The trustee may make decisions regarding distributions to the trust’s beneficiaries, including the grantor. Domestic Asset Protection Trusts may be structured by a grantor who fears that the trustee or trustees may be “spendthrifts” who might spend all of the assets in the trust (such as a child who may have a substance abuse problem). But DAPTs also serve to protect the assets of the grantor, because he or she has no legal control over them.

The second part of the “Cowboy Cocktail” is the LLC, or Limited Liability Company. An LLC offers limited liability, like a corporation, and the management and tax structure of a partnership. When combined with a DAPT, any income generated by the LLC’s income goes in the DAPT. This “one-two punch” protects all assets from creditors who may hold a “charging order” for the LLC’s income (in the case of a bankruptcy, for example). The LLC’s income is protected by the DAPT. Furthermore, Wyoming does not charge any state tax on income.

Sound complicated? If this is a new concept to you, it may. But from a legal standpoint, the “Cowboy Cocktail” is relatively easy to set up, and may ultimately offer you the peace of mind that your assets are protected. Speak with a skilled Wyoming asset protection lawyer to help you decide whether the “Cowboy Cocktail” is right for you.

Attorney Graham Norris and his associates at the Norris Law Group serve the residents of Utah County, UT and throughout Utah, Wyoming and Idaho. Contact them today at 801-932-1238 or online for a free consultation.

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