Guide to Asset Protection Trusts

Protect your assets from judgments and creditors through an asset protection trust

By Sharon Cullars

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Asset protection trusts shield your real and personal assets from possible seizure by creditors or from lawsuits against you or your business. Without an asset protection trust, you can have everything you worked for taken away in one judgment. For this reason, your business plan should always include a protection vehicle for such assets as banking accounts, cash, personal property and realty, including your home.

When not controlled by statute, an asset protection trust is known as a common law trust. Some trusts are set up under state law, particularly in Alaska, Delaware and Nevada; such a trust is referred to as a domestic asset protection trust. You can decide whether to set your asset trust fund with you as grantor, trustee or beneficiary, or a combination of all three. You can also designate your heirs as beneficiaries and be assured that their inheritance will not be subject to probate court or subject to federal estate taxes. Here are things to consider about asset protection trusts:

1. Consult an asset protection law firm for the best legal strategy to shield your assets.

2. Transfer assets to your heirs through living trust asset protection.

3. Set up an offshore asset protection trust.

Action Steps
The best contacts and resources to help you get it done

Consult a lawyer about asset protection trusts

When setting up an asset protection trust fund, consult a lawyer who can tell you just how much protection a trust fund can afford you as well as discuss the legal underpinnings and ramifications. You can then determine which legal structure is best to protect your assets.

I recommend: Klueger & Stein, LLP provides 30 years of experience in asset protection and can help you protect your home, your business and your investments. Lodmell & Lodmell has protected over $3.5 billion in assets for more than 3,500 clients. The firm also provides information to dispel the many misconceptions surrounding asset protection.

Transfer assets to your heirs through an asset trust fund

A living trust basically acts like a will, passing on your property to your designated heirs. But unlike a will, your heirs (beneficiaries) can avoid a lengthy probate and fees with a living trust asset protection. Upon the death of the grantor, the trust becomes irrevocable, and the assets are under the trustee's discretionary control, remaining outside the reach of creditors.

I recommend: Simkin & Associates provides living trusts among its asset protection strategies. You can create trusts that will minimize taxes and allow multiple beneficiaries to share property, as well as provide asset management for impaired beneficiaries. Koldin Law Center can advise you about the various trusts that provide protection, including a Medicaid asset protection trust.

Consider an offshore asset protection trust

Offshore asset protection trusts have their pros and cons, but they are considered good protection against creditors and frivolous lawsuits. These trusts are usually set up in countries with flexible trust laws that also offer investment diversification.

I recommend: Asset Protection Corporation consultants can set up your trust in havens like the Cayman Islands and the Bahamas. Get free consulting from Swiss Private Bank about their tailor-made asset protection strategies.

Tips & Tactics
Helpful advice for making the most of this Guide

Even though most asset protection trusts are common law trusts, a few states--Alaska, Delaware and Nevada--have passed anti-creditor statutes that allow domestic asset protection trusts to be created under law. However, the 2005 changes in the federal Bankruptcy Code include a 10-year limitation clause that makes transfers to domestic asset protection trusts 10 years before bankruptcy automatically suspect. Therefore, you should be wary of using one of these statutory trusts for asset protection.

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