What Is a Bulletproof Trust?

A bulletproof trust is a trust structured so that creditors cannot reach the assets held inside it. The term is not a legal classification but a practical description: if a creditor with a valid judgment cannot force distributions, reverse transfers, or otherwise collect against trust property, the trust functions as bulletproof.

No trust achieves absolute invulnerability. Every trust structure has at least one potential weakness, whether through fraudulent transfer challenges, bankruptcy proceedings, or the limits of the governing jurisdiction’s law. The realistic question is how close a particular trust comes to that standard and where its vulnerabilities lie.

Living Trusts Are Not Bulletproof

A revocable living trust provides no asset protection whatsoever. The trustmaker retains the power to revoke or amend the trust at any time, and the trustmaker is the primary beneficiary during their lifetime. This makes every living trust a self-settled trust under Florida law.

Florida Statutes § 736.0505(1)(a) provides that while a trust is revocable, all trust property is subject to the claims of the settlor’s creditors. A judgment creditor can reach every asset inside a living trust as though the trust did not exist.

Living trusts serve important estate planning purposes—they avoid probate, maintain privacy, and provide for incapacity management. Asset protection is not among those purposes. Any marketing that describes a revocable living trust as “bulletproof” or “creditor-protected” is incorrect under Florida law.

Irrevocable Trusts Are Close to Bulletproof

An irrevocable trust created by one person for the benefit of someone else is not self-settled. Because the trustmaker is not a beneficiary, creditors of the trustmaker cannot reach trust property, and creditors of the beneficiary face two independent legal barriers.

Spendthrift Protection

A spendthrift clause prohibits a beneficiary from assigning their trust interest to a third party, whether voluntarily or under court order. Under Florida Statutes § 736.0502, a valid spendthrift provision must expressly restrain both voluntary and involuntary transfers. When it does, a creditor holding a judgment against the beneficiary cannot attach the beneficiary’s interest in the trust or demand that the trustee pay the creditor directly.

Discretionary Distribution Protection

Florida Statutes § 736.0504(1) separately provides that a creditor cannot compel a trustee to make a discretionary distribution to a beneficiary. If the trust agreement gives the trustee discretion over the timing and amount of distributions, the trustee can withhold distributions when a creditor is attempting to collect. This protection applies even if the beneficiary serves as trustee of their own share.

Combined Effect

An irrevocable trust that includes both a spendthrift clause and discretionary distribution language is nearly bulletproof against the beneficiary’s creditors. The spendthrift provision blocks attachment of the beneficial interest. The discretionary distribution clause prevents a court from ordering the trustee to make distributions that would flow to the creditor.

Florida courts have consistently enforced both protections. The beneficiary’s interest remains shielded as long as the assets stay inside the trust. Once a trustee distributes funds to the beneficiary, the distributed money is no longer protected by the trust’s terms and becomes reachable by the beneficiary’s creditors.

Limitations on Irrevocable Trusts

Two categories of risk prevent even well-drafted irrevocable trusts from being completely bulletproof.

Certain creditors can override spendthrift and discretionary protections. The IRS can place a federal tax lien on a beneficiary’s interest in a trust regardless of spendthrift provisions. Family law courts may consider trust interests when determining alimony or child support obligations, though they generally cannot force distributions from a properly drafted discretionary trust.

Fraudulent transfer exposure is the more significant vulnerability. If the trustmaker transferred assets to the irrevocable trust to hinder, delay, or defraud a creditor, or if the transfer rendered the trustmaker insolvent, the transfer itself can be reversed under Florida Statutes Chapter 726. A court can order the trustee to return the assets to the trustmaker, at which point the assets become available to the trustmaker’s creditors. The statute of limitations for fraudulent transfer claims in Florida is four years from the transfer date or one year after discovery.

An irrevocable trust funded well before any creditor claim arises, when the trustmaker is solvent and has no pending threats, faces minimal fraudulent transfer risk. A trust funded in response to an existing or foreseeable claim faces substantial risk regardless of its internal protections.

Domestic Asset Protection Trusts Are Not Bulletproof

A domestic asset protection trust (DAPT) is a self-settled irrevocable trust formed in a U.S. state that permits the trustmaker to be a beneficiary while still claiming creditor protection. Florida does not authorize DAPTs and has a strong public policy against self-settled asset protection trusts.

A Florida resident who creates a DAPT in Nevada, South Dakota, or another DAPT state faces two problems that prevent the trust from being bulletproof.

Florida courts apply Florida law to Florida residents. When a judgment creditor seeks to collect against a Florida debtor, the court will likely apply Florida’s prohibition on self-settled trust protection rather than the DAPT state’s more favorable statute. The trust agreement’s choice-of-law provision does not bind the Florida court.

The domestic trustee is subject to U.S. court jurisdiction. If a court orders a domestic trustee to turn over assets—whether on self-settled trust grounds or as a fraudulent transfer remedy—the trustee will comply. No domestic trust company will defy a binding court order to protect one client’s assets. This vulnerability exists regardless of the DAPT state’s statutory protections.

Cook Islands Trusts Come Closest to Bulletproof

A Cook Islands trust is a self-settled offshore asset protection trust administered by a licensed trustee company in the Cook Islands. The Cook Islands International Trusts Act provides a legal framework specifically designed to protect trust assets from foreign creditor claims.

Several features distinguish a Cook Islands trust from every domestic alternative.

The Cook Islands does not recognize U.S. civil judgments. A creditor holding a U.S. judgment must initiate an entirely new proceeding in the Cook Islands court system, at the creditor’s own expense, under Cook Islands procedural rules. Most creditors lack the resources or willingness to litigate in a foreign jurisdiction with no guarantee of success.

The Cook Islands imposes a two-year statute of limitations on fraudulent transfer claims against trust transfers, and the creditor must prove fraud beyond a reasonable doubt—a significantly higher burden than the preponderance of evidence standard used in U.S. courts.

The Cook Islands trustee operates outside U.S. court jurisdiction. A U.S. court order directed at the trustee has no binding effect because the trustee is licensed and regulated by the Cook Islands government, not by any U.S. authority. The trustee will not voluntarily comply with a foreign court order that the Cook Islands legal system does not recognize.

Where Cook Islands Trusts Are Vulnerable

Even a Cook Islands trust is not perfectly bulletproof. U.S. bankruptcy courts have jurisdiction over a debtor’s worldwide assets, and a bankruptcy judge can order a debtor to repatriate offshore trust assets. A debtor who refuses to comply with such an order faces civil contempt, which can include incarceration. Several reported bankruptcy cases have involved debtors held in contempt for refusing to bring back offshore trust assets.

Outside of bankruptcy, a U.S. court may hold a debtor in contempt for failing to direct the offshore trustee to return assets. The practical question is whether the court’s contempt power will compel compliance when the debtor genuinely cannot control the trustee’s actions. Well-drafted Cook Islands trusts include duress provisions that prevent the trustee from complying with distributions made under court compulsion, which creates a factual defense to contempt—but courts have not uniformly accepted this defense.

How Trust Types Compare on Bulletproof Protection

Trust Type	Self-Settled	Creditor Can Reach Assets	Fraudulent Transfer Risk	Jurisdiction Risk
Revocable living trust	Yes	Fully exposed	N/A	N/A
Third-party irrevocable trust	No	Spendthrift + discretionary block	Yes, if transfers were fraudulent	Low (Florida law supports)
DAPT (Florida resident)	Yes	Likely, under FL public policy	Yes	High (FL courts apply FL law)
Cook Islands trust	Yes	Extremely difficult for creditors	Limited (2-year SOL, beyond reasonable doubt)	Low (outside U.S. jurisdiction)

The practical spectrum runs from zero protection (living trust) to near-complete protection (Cook Islands trust). Each step up addresses a specific vulnerability that the previous structure leaves open.

A third-party irrevocable trust eliminates the self-settled problem but remains vulnerable to fraudulent transfer challenges. A DAPT attempts to solve the self-settled problem through statute but fails for Florida residents because of conflict-of-law issues and domestic trustee vulnerability. A Cook Islands trust addresses both self-settled protection and jurisdictional enforcement by placing assets and the trustee beyond U.S. court authority.

The right structure depends on the nature and timing of the creditor risk, the assets involved, and whether the individual is willing to use an offshore structure. No single trust is appropriate for every situation, and no trust of any kind should be considered a substitute for proactive planning before creditor claims arise.