A trust can be an effective way to protect your assets. Those prone to litigation in their personal life, profession, or business can find many benefits in establishing a trust. Consider these six features as you determine whether or not a trust is suitable for your situation.
1. It is an Irrevocable Trust
A domestic asset protection plan is considered an irrevocable trust because you give a trustee irrevocable control of your assets. This means that you cannot make any changes to the trust once it is established. It is solely at the discretion of the trustee.
The irrevocable nature of the trust allows for more robust protection of your assets. In the case of a lawsuit, divorce, creditor claim, or asset valuation, it is likely that the law will not allow the assets in your trust to be considered because you do not control them.
2. Heirs Can Skip Probate Fees
The probate process can be expensive and lengthy. If you establish an asset protection trust as part of your estate planning, your heirs can avoid probate costs for the assets distributed from the trust.
3. Some States Do Not Offer This Kind of Trust
Currently, there are 17 states that allow you to establish a domestic asset protection trust. Each of these states has specific laws that affect the kind of protections your trust can afford you. Make sure to consult a trust company in the particular state you wish to create the trust to help you decide if that state can best serve your needs.
4. It May Be Less Expensive Than a Foreign Asset Protection Trust
You can establish an asset protection trust domestically or abroad. However, creating a foreign asset protection trust tends to be more expensive. If you want to decrease the costs of setup and ongoing management of your trust, establishing your trust domestically might be a better option.
5. There Is Protection in Case of Incapacitation
If for any reason, you become incapacitated, your wishes will still be carried out through your trust. This is another way that a trust can be used as a part of your estate planning.
6. The Trust Can Be Used To Protect Businesses
If there is a great deal of liability associated with your business, a trust could be a way to protect your assets from litigation. An asset protection trust can be used in addition to the protection of establishing a limited liability company.
It is important to note that a trust should be established well before any protection is needed. There is a chance that your trust could be disregarded if it is established shortly after a lawsuit or creditor claim and perceived to be a way to circumvent the law.
Protecting your assets from various claims, including after death, can be a cumbersome task. A trust can be used to ensure your wealth is used in the way you want. Understanding its benefits can help you create a plan in the present that protects your estate’s future.