Trusts aren’t just for estate planning. Asset Protection Trusts (APT) can be a great way to protect your valuables. We help you decide what’s right for you.
Everything You Need to Know About Asset Protection Trusts
What is an Asset Protection Trust?
An asset protection trust is a structure that holds assets and then describes exactly how those assets will be used to benefit specific people or entities. It removes an asset's title from your name. When a creditor pursues you, they can’t go anything you’ve transferred to your APT.
Who Can Benefit From an Asset Protection Trust?
Anyone who wants to put their assets into an APT can do so. This is most helpful for high-net-worth individuals, business owners, professionals in high-risk occupations (e.g., doctors, lawyers), real estate investors, individuals concerned about future lawsuits, and wealthy families who are estate planning.
How Does an Asset Protection Trust Work?
When an asset protection trust is set up, there are 3 roles: grantor, trustee, and beneficiary. The grantor is the person who creates and puts assets into the trust. The trustee is the company or person who oversees the day-to-day functions of the trust. The beneficiary is the person who gets the benefit of the trust assets. You can set yourself up as the grantor and the beneficiary.
Why Set Up an Asset Protection Trust?
With the help of an attorney (us!), you can protect your assets from legal claims. Much like an LLC, an APT is a legal structure that separates assets from their owner, putting them out of reach from creditors. This kind of trust can also be more effective than prenuptial agreements when getting married.
What Can Go Into an Asset Protection Trust?
Assets include personal home, real estate investments, securities, stocks & bonds, intellectual property, savings & checking accounts, LLCs & corporations, alternative currencies (e.g.. Bitcoin) and, antiques & collectibles. Depending on your situation or assets, you may want to keep some assets out of your APT.
When Should You Set Up an Asset Protection Trust?
Asset protection is about planning ahead. It works best when you do it before you have any problems. It's a legal way to organize your money and property to keep it safer. Early in your career and when you acquire significant assets can be good times to look into setting up an APT.
Set Up an Asset Protection Trust
Trust Creation and Execution
We prepare your asset protection trust document. This legally binding document tells the trustee(s) how to manage it and names the beneficiaries.
Assets Transfer
The grantor transfers assets to the APT by first opening bank and investment accounts in the asset protection trust’s name. Once open, they transfer assets. Transferring any real estate property is done by executing and filing a deed to the trust’s name. Other assets may be transferred over time.
10 Benefits of an Asset Protection Trust
- Protection from creditors: Asset protection trusts shield assets from potential future creditors or legal claims.
- Estate planning: They can help in efficient wealth transfer and estate tax minimization.
- Privacy: An APT often provides a level of confidentiality regarding asset ownership.
- Flexibility: These kinds of trusts can be structured to support specific needs and circumstances.
- Control retention: Grantors can maintain some control over assets while benefiting from protection.
- Lawsuit deterrence: The presence of an APT may discourage frivolous lawsuits.
- Business continuity: They can ensure smooth asset transition in case of incapacity or death.
- International options: Offshore APTs may offer additional legal protections in some cases.
- Protection from divorce settlements: In some jurisdictions, asset protection trusts can shield assets in divorce proceedings.
- Professional liability protection: Particularly beneficial for those in high-risk professions, such as doctors, lawyers, pilots, professional athletes, and public figures.
How to Decide If an Asset Protection Trust Is Right for You?
An asset protection trust may be right for you if you want to protect your personal assets. These kind of trusts are commonly used by those who own businesses in risky industries, question the ability of heirs to manage an inheritance, or bring unequal wealth to a marriage.
Professions that tend to benefit from APTs are those that are more exposed to potential lawsuits, malpractice claims, or significant financial liabilities. When the nature of your work puts you at higher risk of legal action, making asset protection strategies particularly valuable.
Asset Protection Trust FAQs
An asset protection trust (APT) is a type of irrevocable trust. Once established, an irrevocable trust cannot be easily altered, modified, or terminated by the grantor. When someone creates this trust, they give their assets to the trust forever. Irrevocable trusts can be a good way to not only protect your assets but also help you pay less in taxes when you die and pass on your money to your family. It might also help you get Medicaid if you need it. The trust can stop people from suing you because they know they can't reach your assets . It can also protect your family members from their own money problems. The downside is you can't control anything you put into the trust. But overall, irrevocable trusts can keep your things safe for a long time, even after you're gone.
Asset protection is simply trying to protect your assets from creditors or anyone else who might want to take them. There are many ways to achieve this protection. Asset protection is important for people who have a lot to lose, like business owners or doctors. It can be useful for anyone who wants to keep their savings and property safe. The goal is to make sure that if something bad happens, like getting sued, you don't lose everything you've earned.
The pros of an asset protection trust are asset protection, potential tax advantages, probate avoidance, and controlled asset distribution. The cons are usually the startup and costs to maintain the trust. With LLCAttorney, you get attorney-level service without law firm-level fees.
An LLC, or limited liability company offers some liability protection for your personal assets if someone sues your business. If someone brings legal action against you personally, however, the LLC isn’t involved. This is when an asset protection trust can help protect your personal assets.
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