Are Asset Protection Trusts Legal? Find out from Legally Mine

To answer the question right off the bat, yes. Asset protections are 100% legal when created correctly and used properly.

Now that we have that out of the way, you need to know that having an asset protection trust will protect your wealth from future creditors, allowing you to pass your personal property on to loved ones as stated in your will.

Here, Legally Mine answers more of your important questions about asset protection trusts.

How Does an Asset Protection Trust Work?

An asset protection trust is created by a grantor who signs a trust document and transfers assets into the trust. This transfer to the trust is permanent and irrevocable, and cannot be changed by the grantor. This is key for shielding the assets from future creditors.

If created properly, the assets in the trust are unreachable and unusable other than for trustee-approved discretionary payments of income and/or principal from the trust.

Who Needs an Asset Protection Trust?

If you don’t expect any risk of future creditors, you may not need an asset protection trust. However, there are some circumstances that put your assets at risk.

You will want an asset protection trust if you:

• Think you may experience a future personal injury lawsuit

• Work as a high-risk professional such as a lawyer, doctor, dentist, architect, builder, real estate developer, accountant, or executive

• Own a business

What Should You Consider When Creating an Asset Protection Trust?

There are five things you should consider when creating an asset protection trust:

1.    Potential Future Creditors: Keep in mind that some states require a waiting period from the time you create a trust for it to take effect. 

2.    Which State You Want to Govern Your Trust: You don’t necessarily have to reside in the state that allows trusts.

3.     Your Trustee: Choose an individual or corporate trustee who resides in the state where the trust is created.

4.    Which Assets You Want Protected: You may have to move assets to the state in which the trust is created. This is easy with cash, stocks, or bonds. It is not possible with real estate.

5.     Access to Funds: Do you want payments from the trust? Do you want other members of your family to be eligible for discretionary distributions from the trust?

When Won’t an Asset Protection Trust Work?

There are a couple of instances when an asset protection trust won’t work. First, while asset protection trusts are legal in many states, not all states allow all forms of them. This is because some people could use these trusts to wrongfully avoid creditors. Second, some creditors will be able to reach your assets even with an asset protection trust.

For example:

• Family Obligations (child support, spousal support, and alimony)
• Taxes
• Necessary services or supplies (medical services, etc.)
• Some court judgments against the grantor

Learn More from Legally Mine

Legally Mine is a specialty firm which has been helping medical and business professionals protect their assets for over 40 years. Our experience is second to none, so when you have questions or concerns regarding your assets and how to keep them safe, you can trust our advice.

Learn more about asset protection from Legally Mine!