How to Set Up an Asset Protection Trust Tips, Property Advice, Guide
How to Set Up an Asset Protection Trust
Oct 14, 2020
Asset protection involves securing your assets and protecting them from the creditors of the person against whom you have applied for protection. An asset protection trust is where a third party gives its assets to another person in return for protection against a third party. The main objective of this is to avoid losing assets in the event of a bankruptcy or a civil suit. Also, if the asset is of very high value, it is often protected in this way.
An asset can be anything, whether tangible or intangible, but often refers to one’s money, home, automobile, or another valuable asset. The purpose of this type of protection is to give protection to one’s assets and money. However, the property must be used in a lawful manner.
If you’ve long thought about the possibility of setting up an asset protection trust, these tips below can help you out:
- Work with an Estate Planning Attorney
One of the most important aspects in setting up an asset protection trust is to choose a lawyer who is experienced in this field. An asset protection lawyer has the experience to guide you through the process of choosing an asset protection trust that will work for your specific situation.
They offer free consultation services so that you can seek advice from a professional before filing a protection application.
An estate planning attorney brings about the following functions:
- Advise the client on how to use the funds and the terms and conditions laid out in the asset protection trust, such as the interest rate and the custodian;
- He helps the client to avoid conflict with the bank on repayment of the assets. In this way, it’s possible to pay only what the attorney advises the client to;
- Provides advice on what to do with the account when there’s no bank to pay off.
- Consider the Type of Asset Protection Trust
There are different kinds of asset protection trusts, but the two most common ones are:
- Irrevocable living trust. This type isn’t always the best vehicle for the purposes of asset protection. The settlor, or individual who makes the life estate, basically holds the title and control of the entire trust’s assets, which means they can sell assets out of it or even change the terms of the whole trust at any time.
- A revocable living trust. This kind, on the other hand, doesn’t allow for a transfer of assets. It can be revoked, however, by making the decision to do so. However, it can never be changed. In fact, it is very difficult to revoke a revocable life estate, and in most cases, the assets are actually protected until such a time as the owner decides otherwise.
Both types of trusts offer protection against the risk of losing assets. The difference between these two types of trusts is that the irrevocable living will only give the person who is named on the will the ability to transfer the assets; whereas the revocable one gives the trustee the right to do so. If someone wants to change the trustee or assets on their will, the trustee is under no obligation to do so, and can instead notify them to do so.
- Choose a Trustee and Name the Beneficiaries
A part of setting up an asset protection plan also necessarily involves choosing a trustee, and naming the beneficiaries. Beyond just this, you’ve also got to specify how you want the trustee to manage your assets, while holding it in behalf of your beneficiaries.
Here are some tips you can be guided by, when choosing a trustee:
- The trustee should be a person you have faith in, so you can have the assurance that the trust’s purposes are fulfilled;
- They should be willing to take on this serous responsibility.
- Fund the Trust
When the trust document is completed and already executed, now comes the final step of transferring assets into the trust account. Note that an asset protection trust serves no purpose, without any funds in it. There are many different ways to fund the trust, and some common examples include:
- As to real estate, this process includes creating a deed whereby the ownership of the real estate asset is transferred from your name to that of the trust;
- For other properties such as cars, boats, and others movables, the ownership should also be transferred from your name to the trust;
- For properties without a title, a document can also be executed to enumerate all these in particular and transfer ownership to the trust.
A brief background of this is that it is designed to avoid losing your property, money, and possessions in a case of financial hardship, like a loss of your job or a medical emergency. The use of asset protection is usually a long-term process. It takes time to build a strong reputation with creditors and to gain the trust of your clients. These tips can help shed light on you, regarding this serious matter of asset protection.
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