Asset protection trusts, which are controversial and used to block creditors, are becoming more popular.

Michigan recently became the 17th state to allow controversial asset protection trusts, according to Forbes in “Michigan Debuts The Latest State Asset Protection Trust.”

Short of filing for bankruptcy, which requires that you have no assets, asset protection trusts are the best protection against creditors. They aren’t always popular, especially with creditors.

Asset protection trusts allow someone to transfer their assets into a trust that is controlled by an independent trustee. That trustee can then refuse to pay any creditors with trust assets.

To make this a little more fair for “current” creditors, suits against trust assets are allowed within a statute of limitations. These trusts are controversial enough when talking about institutional creditors, but they become even more controversial when they are used to shield assets from family law courts, which some states allow. These trusts allow people to protect assets from a spouse in a divorce.

Most states do have an exception for child support, but not all do.

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