Understanding Asset Protection Trusts
Asset protection trusts are legal entities used to protect the assets of individuals and businesses from creditors. It is a form of estate planning that seeks to protect assets from potential creditors, including other family members, partners, or the government. Assets in an asset protection trust are not available to creditors in the event of legal claims or judgments against the trustor.
How to Set Up An Asset Protection Trust
Setting up an asset protection trust requires the help of a qualified trust attorney or financial advisor. The trustor must first identify the assets to be included in the trust, and then create a trust document that outlines the terms for managing and distributing the assets. Once the trust document is drafted, the trustor must name beneficiaries, trustees, and other relevant parties. Once the trust is set up, the trustor is no longer the legal owner of the assets and can no longer be held liable for them.
Pros and Cons of Asset Protection Trusts
Asset protection trusts can be beneficial in protecting assets from legal claims, judgments, and creditors. They offer flexibility in terms of management and asset distribution, as well as comprehensive protection from creditors. On the other hand, asset protection trusts can be expensive to set up, require the trustor to relinquish control over the assets, and can create a considerable tax burden.