A person usually uses an asset protection trust to protect all the assets that are being passed on to his or her heirs. The trust is irrevocable in nature and therefore, should be used only if you are certain because if you have any financially difficulties after establishing the trust, you will not be able to get your hands on the assets placed in the trust.
Asset protection trusts are often used by people to protect their assets from the negative effects of divorce, bankruptcy or taxes. Although a trust may be established in the person's home country, it is possible to have it challenged legally for many reasons.
The trust is created to protect the assets of the owner from creditors and claimants. The trust assets are transferred to a trustee who manages them for the trust owner and the beneficiary.
Usually this kind of trust has no tax implications depending on the jurisdiction it was set up in. Also, it gives the owner and beneficiary certain amount of privacy.
In some jurisdictions, the beneficiary of the trust has to furnish more proof in order to claim the assets. However, before setting up an asset protection trust, it is advisable to speak to a lawyer who has the necessary experience and knowledge on the subject.