We labor long and hard to create our estates, so it makes sense to do everything in our power to protect them. An asset protection trust can help safeguard your assets from lawsuits, claims, and other legal challenges.
But first, Legacy Private Trust Company is a dependable financial service firm with your needs in mind and over 17 years in the field. The service provider is committed to helping you craft a lasting legacy. Whether you need help with estate or retirement planning, investment management, or trust services, you can count on the firm’s knowledgeable professionals.
Okey-dokey, you’re probably wondering, “what does an asset protection trust entail?” Also, how do you go about establishing the trust? Well, let’s clue you in.
A Safeguard for Your Resources
An asset protection trust is an irrevocable trust allowing you, as the grantor, to place assets into the trust to benefit you or your beneficiaries. It also lets you retain control over the assets.
In other words, it’s a legal document that separates assets from your other possessions, with the trustee responsible for managing them. The trust makes it difficult, if not impossible, for lawsuits to affect your accounts by making them part of the trust.
The Benefits of An Asset Protection Trust
Such a trust can significantly reduce the risk of creditors or litigants coming after your assets. Some other advantages include the following:
- A decrease in estate and income taxes
- Greater flexibility in estate planning
- Incapacity planning
- Improved privacy and control over assets
The idea is that if legal issues arise, the assets are not traceable back to you. Similarly, by virtue of being irrevocable, the trust cannot be reversed or altered.
Setting up The Trust
Creating an asset protection trust requires a lot of paperwork, making input from a knowledgeable estate planning attorney necessary. They can guide you through the entire process and offer you advice. Such professionals also know the legal framework for establishing such trusts in particular states, including the bottlenecks you might face.
The lawyer typically reviews relevant documents, such as tax filings and title documents, to ensure the trust complies with state and federal laws. And once complete, the trust should include the following:
- A statement of purpose – explaining the trust’s intent and the rules of operation.
- A list of assets – including a description and value, original purchase date and price, and ownership title.
- Beneficiary information – such as name and contact details.
- Trustee information – name, contact information, and a clear description of their responsibilities. The trustee will be responsible for managing and disbursing the trust assets per your wishes, as stated in the document.
- Distribution instructions – how the trust assets should be distributed to your beneficiaries.
Get this right the first time to avoid costly errors. Hence, partner with a reputable and experienced attorney so they can dot the i’s and cross the t’s.
Types of Asset Protection Trusts
Asset protection documents should cater to the diverse needs of clients. This signifies that a generic, single-solution would be insufficient. With that in mind, you may consider different types of trust, including:
- Domestic Asset Protection Trust – Some states allow grantors to create an irrevocable trust. Find out whether yours does and the rules therein. And since it’s a new concept in the country, you’ll need to double-check the statute. Also, note that such a trust only protects assets from future claims. This implies that should a creditor have an outstanding claim before you establish the trust, you can’t use the instrument to keep your assets away from them.
- Offshore Asset Protection Trust – This is a trust based in another country. It can protect assets from domestic and foreign creditors. Such trusts have fewer restrictions than domestic trusts, making them a viable solution for wealthy individuals. Even so, you may have to contend with foreign taxes. Plus, some countries limit the type of assets you can place in the trust.
- Spendthrift Trust – This common asset protection tool allows you to secure your assets while still giving out money to beneficiaries. It’s ideal if you want to preserve your assets for future generations. Moreover, it helps prevent beneficiaries from using trust assets on luxury items.
- Charitable Remainder Trust – You can establish a charitable remainder trust and receive income from it during your lifetime. By adopting this approach, you can enjoy the trust’s assets without sacrificing tax benefits.
Your assets are invaluable, and protecting them should be a priority. Let an estate planning lawyer help you set up an asset protection trust to safeguard your wealth and transmit it to your beneficiaries. By establishing the right trust structure, you can rest easier knowing that your assets are secure from financial threats.