schedule
consultation
107 E Eureka Ave, #1
Eureka, IL 61530
121 N Main St
Bloomington, IL 61701
309-467-3213 schedule consultation
schedule consultation

Tax Reasons to Establish an Asset Protection Trust

Published on August 7th, 2019

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.

Proper Vehicle

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.

Latest posts by PIOLETTI PIOLETTI & NICHOLS (see all)

Back to News

EUREKA, IL LOCATION

107 E Eureka Ave, #1
Eureka, IL 61530

309-467-3213

24/7 live phone answering

BLOOMINGTON, IL LOCATION

121 N Main St
Bloomington, IL 61701

309-821-0246

24/7 live phone answering

KANKAKEE, IL LOCATION

2 Dearborn Square #1D
Kankakee, IL 60901

309-821-0246

24/7 live phone answering

Contact Us Today!