Even the most financially well off people can find themselves in trouble with creditors. Whether it’s poor financial planning, an accident or some other unexpected expense, many of us are just a few missteps away from financial catastrophe. When creditors are hounding you, you may be looking for a way to protect your wealth. An asset protection trust is one of the strongest tools available to protect your funds from creditors. Read this article to learn more about how this tool can protect your assets when you need them most.
What is an Asset Protection Trust
A simple definition of a trust is an arrangement that lets a trustee hold assets on behalf of a beneficiary or beneficiaries. These are often employed to hold funds for an underaged benificiary or for a business during a set period of time. An asset protection trust is the same in that it allows another party to maintain temporary ownership over your funds. Once placed in the trust, your assets are separate from you. This means if you are sued by creditors, these assets are not up for grabs. Several types of assets can be put into this type of trust, among them:
- Stocks and bonds
- Real estate
- Cars and other personal property
In short, an asset trust can help you protect valuables from being confiscated to satisfy judgements.
Types of Asset Protection Trust
There are two main categories of asset protection trust, revocable living trusts and irrevocable living trusts. In the first, the person who creates the trust keeps control and ownership over the assets, with the ability to empty the trust at will. Assets are not fully protected from a creditor’s claim. Though they have benefits, this type of trust is not the optimal choice if harboring assets is your ultimate goal. An irrevocable living trust, on the other hand, places assets in full control of a trustee. Assets in the trust are not considered yours and will be protected from being seized.
Is an Asset Protection Trust Right for Me?
The decision to set up an asset protection trust is not always an easy one. Each type of trust has pros and cons, and different restrictions that can make it unclear if setting one up can truly protect you at all. Rather than going it alone, connect with an experienced estate planning attorney who can help you understand the complexities of this unique financial tool and make a decision that will benefit you.