If you feel that your possessions or estate is in danger of being taken by creditors or a lawsuit, you may have started to look into asset protection planning. A common type of asset protection is a special kind of trust called an asset protection trust. This is a complicated financial concept, so you may not fully understand how this kind of trust works and whether it is right for you. It is always best to speak with an estate planning lawyer or asset protection lawyer, but this guide will go over the basics of asset protection trusts.
What Is a Trust?
A trust is a tool commonly used for estate planning and other kinds of possession transferring purposes. Essentially, if you set up a trust, you are transferring your possessions to a third party, who is called the trustee. When the conditions you set are met, your possessions are transferred from the trustee to whoever you determined. Trusts can either be irrevocable or revocable. In revocable trusts, you can still access your possessions after transferring them to the trustee. In irrevocable trusts, however, you have no way of accessing your possessions after setting up the trust. Legally, they no longer belong to you.
How Trusts Can Be Used To Protect Assets
If you suspect a creditor or lawsuit is going to take your possessions, you can put them into a trust to protect them. Because they no longer belong to you, creditors and lawsuits cannot legally claim them as payment. This is not always the case, however. The laws surrounding asset protection trusts vary greatly from state to state. Sometimes, it is possible for the contents of a trust to be susceptible to a court-ordered payment. Ultimately, your location will determine how viable an asset protection trust will be to protect your possessions. In fact, asset protection trusts are not legal in every state. There are only 15 states that allow an asset protection trust to be set up:
- New Hampshire
- Rhode Island
- South Dakota
- West Virginia
If you live in one of these states, you potentially may be able to set up an asset protection trust. If not, you need to look into a different option to protect your assets. Some kinds of asset protection planning are possible without setting up a trust. If you are worried about creditors or being sued, you should speak to a trust lawyer in O’Fallon, Missouri.
Thanks to the Legacy Law Center for their insight into estate planning and trusts for asset protection.