In 2023, debt is likely to cause a serious recession in the U.S. economy. This could lead to more legal disputes, similar to what happened in 2008. Yet, the jurisdiction still draws investors without end.
Every year, more and more wealthy people migrate to the U.S. This brings up a question: how can I safeguard money in a crisis without leaving the country? New immigrants often don’t realize that they might potentially face lawsuits even if not guilty. What is worse, they may find out about it when it is too late and the legal issues are in full swing.
Hence, it is wise to look for alternative ways to protect money in the U.S. if you cannot keep it abroad. Even with this option, you won’t find a one-size-fits-all solution. Different states have varying and often contradictory laws and regulations on how to protect your assets. Hence, choosing the right state for asset protection is your number one priority.
Factors to consider when you choose an asset protection state in the US
Several factors determine what state is optimal for asset protection. Here are some of the most important ones:
Level of asset protection: Some U.S. states offer stronger and broader protection for your assets than others by allowing you to create self-settled asset protection trusts. Others either do not recognize or limit the effectiveness of this instrument.
Tax implications: Tax situations in different states vary widely, affecting your wealth and taxes. Some of them have no or low taxes on income, estates, or inheritances, which can help you keep more money and avoid being taxed twice. High taxes that lower your net worth and create tax issues may be peculiar for other states.
Residency requirements: Residency rules for asset protection and trust laws are also different. Some states only let you use their laws if you are a resident, while other U.S. regions come with no such requirement.
Legal issues: In certain U.S. states, you’ll come across more litigation and creditor-friendly laws than in others, running the risk of being sued or having your assets seized. This way, in some places, they have longer statutes of limitations, while elsewhere in the U. S. these are shorter, limiting the exposure of your assets to creditors.
Best and worst U.S. states for asset protection in 2023
Based on these factors, the International Wealth team has come up with a list of the best and worst states for asset protection in 2023.
Top U.S. states for asset protection
These are the states that offer the highest level of asset protection, combined with the lowest tax burden, the most flexible residency requirements, and the least legal risk for your assets. Here’s what the list looks like for 2023:
Nevada: As of 2023, Nevada is one of the most popular and reputable states for asset protection in the U.S. It has no state income, estate, inheritance, or corporate taxes. It also boasts some of the strongest asset protection laws in the US, e.g., the Nevada Asset Protection Trust, which is a self-settled trust that protects your assets from creditors, lawsuits, and bankruptcy. Admittedly, Nevada has a favorable statute of limitations for debtors. There, creditors only have two years to sue you for debts or judgments. The state also does not require you to be a resident to benefit from its asset protection or trust laws.
Wyoming: Wyoming offers great asset protection and tax advantages. With no state inheritance, income, estate, or corporate taxes, Wyoming boasts powerful asset protection laws, e.g., Wyoming Qualified Spendthrift Trust, which shields your assets from both external threats and bankruptcy. The time to sue expires after four years in Wyoming.
Delaware: With no state income tax for non-residents, no estate or inheritance taxes, low state corporate tax, and a short statute of limitations (four years only), Delaware is superb for asset protection in the U.S. Just like the above U.S. regions, Delaware has no residency requirements to apply its asset protection or trust legislation.
Worst U.S. states for asset protection
With their low asset protection, high tax burden, stringent residency requirements, and the most legal risk for your assets, these states are among the worst ones to protect your assets in 2023:
California: Unfriendly and hostile as far as asset protection is concerned, California has high state income, estate, inheritance, and corporate taxes. Its weak asset protection laws, a long statute of limitations of six years for creditors, and strict residency requirements to apply asset protection or trust laws mean you have few chances to successfully protect your assets there, should anything happen.
New York: In New York, the asset protection level is low and taxes are high, including those for income, estate, and inheritance. The corporate tax is also far from being low here. The state’s asset protection legislation does not shield your assets from bankruptcy, creditors, or lawsuits. New York also gives creditors six years to sue, which is considered a long statute of limitations, and requires you to be a resident to be eligible to apply its asset protection or trust laws. It is impossible to benefit from them if you live in another state.
Illinois: A state with high taxes and weak asset protection, Illinois charges unreasonable inheritance, estate, income, and corporate taxes. It also has poor asset protection laws, one example of which is the Illinois Asset Protection Trust incapable of protecting your assets from creditors, lawsuits, or bankruptcy. Another reason not to choose Illinois to protect your wealth is that it allows creditors to sue you for debts and judgments for up to ten years, which is among the longest statutes of limitations in the U.S. To be subject to the state’s asset protection and trust legislation, you need to be a resident, and it is impossible otherwise. You certainly can’t use their laws if you’re in another state.
Care to learn more about how you can protect your wealth in the U.S.? Contact International Wealth tax pros for further advice. Supported by us, you’ll be able to safely keep your assets in the jurisdiction, without moving them elsewhere.