A trust is a legal tool that can serve as part of an estate plan. This tool can serve many purposes, including asset protection. It is important to include specific provisions within the language of the trust to achieve this goal. One key to asset protection when creating this type of trust is that the trust be irrevocable. This means that the creator does not have the ability to change the trust. Once created, the trust is permanent. If the creator can reach the assets of the trust, it is likely the creditors can as well.
Will I still benefit from the trust?
Yes, you, the creator, can still list yourself as a beneficiary. You just cannot have control over the trust in order for it to shield the asset from creditors.
Who benefits most from this type of trust?
Asset protection trusts can provide benefits for any family, but those who are most likely to make use of these legal tools include the following:
- Business owners. Ideally, you incorporate your business in such a way to protect personal assets in the event something goes wrong with the business. An asset protection trust can provide an additional layer of protection.
- Wealthy. Those with large wealth are wise to protect some of it with a trust.
- Prenuptial arrangement. These tools can also protect family wealth from potential asset division during a divorce.
Those in high-risk professions can also benefit from this type of trust. Examples can include physicians and other medical professionals at risk of medical malpractice lawsuits.
Is there anything else I should know before starting an asset protection trust?
These are just a few of the main points to consider before starting an asset protection trust. Additional discussions about using a domestic versus foreign structure and which assets to hold in the trust are also important. An attorney can have these and other discussions with you to better ensure you understand the impact of the trust before you start the process.