Alaska asset protection: the state that invented the trust, and proved its limits

Alaska invented the domestic asset protection trust in 1997. Then Alaska’s own supreme court ruled that the statute cannot keep other states’ courts out, and a federal bankruptcy judge voided an Alaska trust that had been set up correctly.

That is the honest Alaska story, and it is the reason this page is worth reading next to the Nevada page, where the same tool produced a courtroom win. Alaska is where the asset protection trust’s real limits got proven. Within those limits the tool still works, and Alaska’s LLC charging order is as strong as any state’s.

The trust that taught the limits

Alaska’s DAPT statute, AS 34.40.110, lets you create an irrevocable trust, keep yourself as a discretionary beneficiary, and shield the assets from your own future creditors. The trusts and LLCs page covers the general machine. Alaska’s contribution to the field is two cases that drew the boundaries.

A domestic asset protection trust cannot keep a determined creditor in the trust’s home state, and it cannot outrun a federal bankruptcy court.

In Toni 1 Trust v. Wacker, the Alaska Supreme Court looked at the part of the statute that tried to give Alaska courts exclusive jurisdiction over any challenge to an Alaska trust, and held it cannot bind the courts of other states or the federal system. A creditor can litigate the transfer where the creditor is, and the Constitution forces Alaska to honor that judgment. In the Mortensen bankruptcy case, an Alaska trust that was funded while the settlor was solvent, with no known creditors, was still unwound under the federal ten-year lookback for self-settled trusts.

Read those two honestly. The limits they describe bind every asset protection trust in every state, Nevada and South Dakota included. Alaska is simply where they were litigated, because Alaska was first and had the most trusts to test. The tool is not broken. No such trust has been cracked in a clean case, one with no fraudulent transfer and no bankruptcy. What Alaska teaches is that the trust must be funded early, while the sky is clear, and that it works best for someone genuinely connected to the trust state. Alaska’s seasoning period runs four years, longer than the two-year clocks in Nevada and South Dakota.

The charging order is strong and covers the single owner

For a personal creditor coming after your Alaska LLC stake, the charging order protection page has the mechanics. Alaska’s statute sits in the top tier.

Alaska’s charging order is the creditor’s only remedy, and it covers the single-member LLC by name.

AS 10.50.380 makes the charging order the exclusive remedy, bars foreclosure on the interest and any order for directions, accounts, and inquiries, and states in subsection (e) that it applies to LLCs with one member as well as more than one. The creditor is left an assignee of distributions. One Alaska wrinkle worth knowing, and covered on the governance page: the statute lets a written operating agreement change these terms, which most states do not allow.

Single owner, and the bankruptcy line

Because AS 10.50.380(e) covers the sole member, there is no Olmstead-style gap in Alaska’s state-law charging order. The single-member LLC page treats that as the exception rather than the rule.

A state charging order statute does not bind a federal bankruptcy trustee, in Alaska or anywhere.

The limit is the same one Mortensen proved for trusts. In bankruptcy a trustee runs on federal law, and with no other members to protect, a court can take a sole member’s entire interest into the estate. Alaska sits in the Ninth Circuit, so the leading single-member case, In re Albright, is persuasive rather than binding here, but its logic travels. Treat a single-member Alaska LLC as exposed in bankruptcy.

Beyond the LLC

Alaska’s exemptions are adjusted for inflation by regulation, so the figures below are the current ones, not the older numbers still in the base statute.

Alaska protects $72,900 of home equity per owner, and each joint owner claims a separate share.

The homestead exemption is $72,900 under the adjusted schedule, and joint owners each claim their own, so a couple can reach $145,800. Retirement accounts are exempt without a cap, and the exemption for life insurance and annuity loan values is a high $500,500. A vehicle is protected to $4,050 and tools of a trade to $3,780. Alaska imposes no state real estate transfer tax, though a few municipalities charge their own. Alaska is also an opt-in community property state, unusual in the country, and a community-property-trust jurisdiction, which matters for married couples chasing a capital gains basis step-up.

The courts

Alaska has no specialized business court and a thin body of commercial case law, so like Wyoming and South Dakota its statutory strength runs ahead of its interpretive record. The courts page explains why that gap matters when a dispute among owners is on the line.

The bottom line

Alaska created the domestic asset protection trust, and Alaska’s own cases, Toni 1 Trust and Mortensen, drew the limits every such trust shares.

Those limits are real everywhere: a home-state or federal court is not bound by the trust state’s statute, and bankruptcy reaches back ten years.

Within the limits the trust works, seasons in four years, and is strongest for people and assets connected to Alaska.

Alaska’s charging order is top-tier: exclusive, single members covered by name, foreclosure and receivers barred.

Home equity is protected to $72,900 per owner, and Alaska imposes no state income tax, no state sales tax, and no real estate transfer tax.

A single-member Alaska LLC should still be treated as exposed in bankruptcy.

What this page does not cover

This page is about how creditors reach you in Alaska. What Alaska’s law lets your operating agreement do, including its unusual power over the charging order, is on the governance page. Taxes, privacy, and the fact that Alaska does not offer series LLCs are on the structure and cost page. Fees, forms, and deadlines are on the filing page.

Last verified July 2026.