There are certain situations where an individual’s assets need to be protected from creditors or certain legal judgments that can threaten them.
One of the ways to shield these assets from such threats is to use an asset protection trust (APT).
If structured correctly, these trusts can offer great protection from creditors and judgments. They also may have tax benefits depending on how and when they are structured.
Below, we’ll go into more detail about asset protection trusts and how they are set up to provide protection.
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Asset Protection Trust Basics
An asset protection trust is similar to other trusts in that the creator of the trust is referred to as the grantor.
There will also be a trustee assigned. This trustee must follow rules regarding the dispersal of any assets held by the trust to beneficiaries or others.
Beneficiaries are also bound by certain rules stipulating how certain assets are dispersed to them. These regulations can be part of a spendthrift clause which allows the trust to hold certain assets or disperse them over time to protect them from creditors if transferred.
Types Of Trust
One feature of an asset protection trust is that it must be an irrevocable trust.
Trusts can be either revocable or irrevocable. In an irrevocable trust, the structure of the trust cannot be changed by the grantor once created. They can also not change beneficiaries or move assets once the trust is created.
On the other hand, a revocable trust still allows the grantor to make changes to it after its creation. In this way, the grantor still controls the assets within the trust.
For this reason, a revocable trust doesn’t offer asset protection as the assets are still under the control and ownership of the grantor.
Domestic And Foreign Asset Protection Trusts
You will have two options when setting up an asset protection trust and those options are to either set up one domestically or choose a foreign trust.
With a domestic trust, you are of course subject to all the laws and court rulings within the United States. Your assets still have protection, but any U.S. court judgments will have to be followed regarding the assets within the trust.
A foreign asset protection trust is one that is set up in a foreign country. These are often referred to as offshore trusts.
Here, the foreign country chosen for the trust will often not respond to or recognize U.S. court judgements, which can give your assets added protection in certain circumstances.
Is an Asset protection trust right for you?
There are many situations beyond your control that can lead to your assets being threatened by judgments or creditors.
An asset protection trust can be a great line of defense against such threats. However, asset protection trusts are extremely complex structures and are best handled by those with years of experience.
The financial experts at ICCNV help their clients secure their assets and gain peace of mind knowing their wealth is as protected for them and their families. They can help you learn whether an asset protection trust may be the right structure to protect your wealth.