Are All Asset Protection Trusts Irrevocable?
As a general rule, yes, asset protection trusts are irrevocable. The purpose of the irrevocability is to make sure that the assets cannot be pulled out of the trust by the trustee in order to pay a creditor. The goal of the asset protection is to keep everything in the trust as long as possible until it is time to give it to the beneficiaries listed in the trust.
What Are The Benefits Of Asset Protection In An Estate Plan?
The main benefits we are looking for are a balance of flexibility and safety. When clients come in to discuss asset protection, we want to make sure that they can sleep at night knowing that their critical, core assets are protected from a worst case scenario. We try to do that in a way that allows them to have control as much as possible. The trust might be a small or a big part of that strategy, but ultimately the strategies are designed to retain as much control, and offer as much protection, as possible.
Why Can’t I Just Transfer My Assets To My Spouse Or Children?
With some assets, that is possible to transfer to family members. The danger in making an outright transfer through a spouse or a child is that once you make that transfer, it becomes their asset. In that sense you will no longer have control over those assets. You might as well gift that to a stranger in so much as you will lose control in a different way. Especially if your kids are young, it is particularly risky to allow someone who is too young to have control over a large chunk of family wealth. There is not much you can do to make sure that they use it well or in a way that furthers your interest. Additionally, courts are particularly skeptical of that sort of transfer.
You are going to see that kind of transfer, but a lot of assets that transfer softly can be undone. You are going to see great skepticism or high potential for a contempt order and once again, a judge in bankruptcy court is going to say, “You need to pull that asset out and we will not discharge the debt in this court.” So it is much safer to plan with an organized long term approach to have the appropriate structure in place to protect you, yourself, and protect your kids both from themselves and from the danger of any judgments in the future.
Is Asset Protection Affected If I Am In Litigation?
This is the time where you would want to talk with a professional. It can be effective, but the approach taken is probably going to be a more conservative one in order to make sure that we stay within both the word and the spirit of the law; if the litigation is just beginning, there might be something we can do, so I would definitely urge you to speak with an attorney.
How Can Business Investments Or Real Estate Assets Be Protected?
Businesses are a great concern for asset protection. There are ways to structure business ownership such that the shareholders or members are not personally liable for a judgment against the company. When working with the owners or partners of a company that may face judgments or legal liabilities in the future, we address ways to structure the company’s ownership or change its type of formation in a way that maximizes protection, with minimal disruption.
Real estate is a highly state specific topic, and methods of asset protection are dependent on state real estate laws.
For example, in Florida, the primary residence is often exempt from a bankruptcy judgment. That warrants a very different strategy than a state where real estate is not protected to that degree. We are going to look at the very specific state law where that property is located in making our approach, but as far as investments, securities, and money, we look to position the asset in the most protected place possible. That might be holding some of it in an asset protection trust.
How Important Is Planning For Small Businesses And Professional Practice?
For small businesses and professional practices, asset protection is particularly important as the business takes off and starts to grow. Typically, bigger corporations, bigger entities, they have plans in place already for this issue. The personal assets of the shareholder are generally shielded from legal claims and judgments. But for a small professional practice with a small number of professionals who have their whole livelihood in that practice, it is very important to talk about your asset protection strategies to make sure that one errant lawsuit cannot lead to a complete destruction of the business. Small businesses have such a need because they do not have much protecting their business.
Can I Protect My Retirement Account From Creditors Using Asset Protection Planning?
Yes, to some degree your retirement accounts are already shielded. So any 401(k)s or IRAs, for example, are often shielded from bankruptcy. If you have been making responsible contributions throughout the years and you continue making those contributions even throughout litigation, as long as it is not unusual, those assets are usually shielded from judgments coming from the bankruptcies.
Can I Plan Now To Protect My Children’s Inheritance Through Asset Protection?
Yes, in some ways that is one of the best strategies – to merge your asset protection strategy with your estate planning strategy, while keeping your children in mind. So, an asset protection trust can easily be used for the benefit of one’s children down the line. Certain policies, like insurance structures or business structures, can pass to one’s children with certain protections upon their death, especially in cases where the children are under the age of eighteen. This strategy accomplishes two goals – both protecting your children and their future security, and making your planning easier because you have someone in mind that can directly benefit in the future.
For more information on Irrevocable Asset Protection Trusts, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (404) 939-7562 today.
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