There is no legal definition of an asset protection trust under Bermuda law or under the laws of most other jurisdictions. An asset protection trust might be described as an express trust with specific terms that aim to protect the trust property from claims brought against the trust’s settlor or beneficiaries. The asset protection qualities of the trust are also impacted by conflict of laws rules of the governing law of the trust and fraudulent transfer legislation. However, asset protection is rarely the sole reason a person might wish to form a trust. One might say that the primary reason trusts remain attractive to most private clients is the flexibility they provide for long‑term succession planning.

Conflict of laws

Conflict of laws rules are procedural rules applied by a court (the Domestic Court) that has jurisdiction to determine an issue having a connection with another jurisdiction (a foreign jurisdiction) to ultimately determine whether to apply the substantive laws (i.e., a jurisdiction’s laws without reference to its procedural, including conflict of laws, rules) of:

• the jurisdiction in which the Domestic Court is situated (Domestic Laws); or
• a foreign jurisdiction (Foreign Laws).

The connecting factor with a foreign jurisdiction might be, for example, that the defendant is resident or domiciled in a foreign jurisdiction or that the property (which is the subject of the issue or dispute) is situated in a foreign jurisdiction.

In common-law jurisdictions, the source of conflict of laws rules is the common law (including customary law where applicable, such as in Guernsey and Jersey) as reiterated, clarified or varied by domestic statutes and international conventions and statute, including, where applicable, EU law.