Estate Planning Lawyer
You may have heard of something called an asset protection trust. This is a special kind of trust that is designed specifically for protecting possessions. Typically a trust’s primary purpose is to transfer items from one person to another. This is why it is a common tool in estate planning. However, asset protection trusts are used for an entirely different reason. Learn who should consider using an asset protection trust.
As a quick reminder, let’s discuss what a trust is. It is essentially an agreement to hold possessions for a temporary period of time. An individual who establishes a trust transfers a set of possessions to a trustee with a condition set. When the condition is met, the trustee transfers the possessions to a third individual at the original trust holder’s discretion. If used for estate planning, the condition will be the death of the original trust holder, and the third individual will be the loved ones who will inherit the possessions.
Asset Protection Trusts
So what is an asset protection trust and how is it different. Instead of intending to leave your possessions behind for your loved ones, this trust protects the items from collection. Specifically, asset protection trusts protect the items from:
- Debt collectors
- Lawsuit settlements
While the items are in the trust, they do not legally belong to you anymore. This means that people cannot collect them in the resolution of a lawsuit or any other form of collection.
You may be thinking that this technique is a little shady, and you would be correct. For this reason, asset protection trusts are illegal in the majority of US states. If you try to set one up in one of these states, it will not protect your assets and you may face criminal charges as well. There are 15 states, however, where asset protection trusts are legal.
So who should consider using an asset protection trust? First, it should go without saying that only individuals who live in states where it is legal should consider them. Second, they are only beneficial for individual who anticipate losing their possessions in the near future. If you fall into both of these categories, you should speak with an asset protection attorney. A legal professional will be able to help you go about setting up a trust correctly and legally. If you do not fall into these categories, you should consider speaking with an estate planning lawyer to create a traditional trust.