Why a Wyoming Trust Might Not Protect You - and What You Actually Need Instead
I got two calls this week, from two completely unrelated people in South Carolina, who both wanted to set up Wyoming trusts for asset protection. Neither one actually needed one.
This isn’t a knock on them, they’re smart people, they did their research and called my office. The problem is that somewhere out there, someone is selling this story:
"If you set up a Wyoming LLC and drop it into a Wyoming trust, your assets will be protected, private, and untouchable."
Let’s break down why that’s not always true.
Myth #1: “A Wyoming Trust Will Protect Me From Creditors”
Only irrevocable trusts offer real asset protection. And even then, it only works if:
You give up control of the assets
The trust is drafted correctly
It’s done before a creditor threat exists
You’re willing to sign an affidavit of solvency - meaning, this transfer into the trust won’t make you have zero assets
If you’re naming yourself as trustee, keeping full control, and still benefiting from the trust, the court sees right through that. It’s your asset, and they’ll treat it like it is.
Wyoming does allow something called a Domestic Asset Protection Trust (DAPT), but it has to be irrevocable. And even if you do it perfectly, your home state doesn't have to respect it. If you live in South Carolina, and a creditor sues you there, the court can simply say, "We’re applying South Carolina law." Game over.
Myth #2: “Wyoming LLCs Are Bulletproof”
Wyoming LLCs do offer strong charging order protection. But here's what that really means:
If someone sues you, they can’t take your LLC assets directly.
They can only get a charging order. This is a lien on any distributions you receive from the company, meaning if you don’t get distributions, that creditor doesn’t either.
Sounds good in theory, right?
Except:
That only works if the LLC is operated like a real business, not a personal piggy bank. You can’t put your personal assets into an LLC and call it a business.
Many courts in other states (like South Carolina) aren't obligated to respect Wyoming's charging order laws.
If you live in SC and all your assets are in SC, SC law and location of property is what matters, not where your LLC is registered.
Myth #3: “Revocable Trusts Offer Asset Protection”
Revocable trusts are great for probate avoidance, incapacity planning, and keeping your estate private.
They are not asset protection tools for you.
Why? Because you still own everything in the trust. You can revoke it, change it, pull money out, etc. That means a court or creditor can, too.
If someone tells you to use a Wyoming revocable trust for protection? They either don’t know what they’re doing or they’re selling you something.
However, we can include “spendthrift” provisions to shield your assets from your beneficiary’s creditors.
Myth #4: “Trusts Help You Avoid Taxes”
This one comes up all the time—and it’s flat-out wrong in most cases.
Revocable trusts? Still taxed to you. No tax savings. Same 1040. Same brackets.
Grantor trusts? Still taxed to the grantor (you), even if irrevocable.
Non-grantor trusts? Sure, they’re taxed separately, but they hit the top federal bracket at just over $15,000 of income. Not exactly a savings strategy.
Also: setting up a Wyoming trust doesn’t exempt you from your own state’s income tax. If you live in South Carolina, that trust income is still going to be taxed in South Carolina.
If a trust does provide tax advantages, it’s because it’s structured intentionally for that purpose, not because it lives in Wyoming.
What Actually Works
If you really want protection, here’s what works:
Irrevocable trusts (done before there’s a problem)
Giving up control of the assets
Strong liability insurance
Separating business assets with clean, well-maintained LLCs and business structuring
Staying out of DIY asset protection TikTok
Final Word
Asset protection is not about finding the right state with magic laws.
It’s about strategy, timing, and tradeoffs.
If you're not willing to give up control or you live in a state that won't respect Wyoming law - then a Wyoming trust isn't the solution.
If you're looking for real, legally sound protection, talk to someone who will give it to you straight.
And if you hear the words “just set up a Wyoming trust” again?
Politely smile, then call me.
