Estate Planning Lawyer
An asset protection trust works to protect your assets from creditors and allows you to settle with them on more favorable terms while avoiding litigation. This can be an incredibly beneficial and valuable tool for some people, but it is vital that it is set up in the correct way to ensure that you do not end up in the legal battle that you were trying to avoid in the first place.
This type of protection is useful for people with high-risk exposure professions such as doctors, lawyers, and uppers levels of management in public companies. It can also be useful for protecting assets from heirs who like spending money or are disabled. Another function may be to replace a prenuptial agreement for a future spouse.
For high-worth individuals, this type of account can be used to gift some of your assets to, using some of your tax exemption. Then, you can drop your asset level below the level that the estate tax kicks in at while continuing to grow your wealth outside of your main estate.
If you already have a revocable living trust, this in itself provides tax benefits such as avoiding probate fees and some estate taxation. However, because this type of trust is able to be changed throughout your life, and assets can be moved and taken out if you have a situation where a creditor wins a lawsuit against you, the court can force you to pay the creditor off using those assets.
An irrevocable trust does not allow you to change it or move assets (changes are at the discretion of the appointed trustee). So, in the example above, those assets would much more likely be safe from the creditors.
Not all states fully approve of these types of trusts, but it is possible to set one up in one of the states that approves them, provided that some or all of the assets in the trust are located in the same jurisdiction. The Cook Islands also allow you to set up an asset protection trust. You must be sure that all rules are followed as this type of remote set up does pose additional risks.
The Right Tool For You
An asset protection trust is a valuable tool for many types of estates, and it might be worth adding to your estate plan to help keep your assets in one piece for your family when you pass. Because they are complex to correctly setup and rules regarding their validity are still being worked out, it is important to work with someone who knows the ins and outs of this type of trust.
Speak with an estate attorney in Cherry Hill, NJ to find out if this strategy could benefit your unique situation and use their knowledge to set it up correctly.
Thanks to Klenk Law for their insight into estate planning and tax reasons to create a trust.