Asset protection trusts are time-consuming to set up, but they will keep your assets out of the hands of creditors and may even discourage lawsuits against you.
In this post, we'll go over several different types of asset protection trusts, as well as some of the reasons why you might wish to set up one of them.
What Are Asset Protection Trusts and How Do They Work?
In the case of an asset protection trust, the assets of the trust beneficiary are particularly protected from creditors. Trusts, like all other types of trusts, are designed to transfer legal ownership of the assets contained inside to the trustee.
This type of trust must be irrevocable in order to provide you with appropriate protection. Otherwise, you will retain control and ownership over the assets included within, and creditors will be able to seize those assets through legal action.
If you are creating an irrevocable trust, you must carefully evaluate the assets you want to include in it because the rules of the trust and the assets that are included in it cannot be changed. That is, once assets have been added to an APT, they cannot be removed from the APT for any reason.
With APT trusts, you are added as a beneficiary, which allows you to have access to the cash and assets held in the trust without being regarded as the legal owner of those monies and assets. Instead, the trust is a separate legal body that is capable of holding a wide range of assets.
When people in high-visibility professions or in community-facing roles feel they are about to be sued, they may choose to form this type of trust in order to protect themselves and their reputation. Small business owners are an example of the kind of individuals who may benefit from this.
These trusts can be used to keep valuable assets such as residences, ensuring that they are not lost in the event of a lawsuit or due to nonpayment of obligations.
Asset protection trusts can be complicated to set up, so it's vital to seek legal assistance from an experienced attorney as you learn more about them and begin the process of establishing one.
With a wide range of services, McKenzie Legal & Financial can assist you in making informed decisions and moving forward. Our financial and estate planning services can assist you in making the most of your life's work while also increasing your retirement savings. Thomas L. McKenzie, a licensed Financial Consultant and a renowned Los Angeles Estate Planning Attorney, works across a broad range of topics to ensure that your ultimate wishes are carried out in the manner in which you desire them to be carried out.
What Is the Difference Between Domestic and Foreign Asset Protection Trusts?
Asset protection trusts are accessible in the United States as well as in other countries throughout the world. Each solution has its own set of advantages and disadvantages.
Domestic trusts are easier to obtain and are more convenient to use than foreign trusts. These trusts are available in 17 states, and you can establish one without having to live in any of those states in order to benefit from it.
You should consult with an attorney to determine which state is the greatest option for you, because laws differ from one state to the next, and one state may be better than the others.
Foreign trusts are trusts that have been established in a different country. These accounts are sometimes referred to as offshore accounts. They are more expensive to set up than domestic asset protection trusts, which is a disadvantage.
They also provide greater privacy, which is one of the primary advantages of establishing trust outside of the country of residence. If you are utilizing the trust to protect your assets in the event that you are sued, this may give you with additional protection. A foreign trust is not subject to the laws of the United States and is instead governed by the laws of the country in which it is established.
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