An asset protection trust is a financial-planning trust vehicle. These trusts, similar to bank accounts, hold an individual's assets. The primary purpose of the asset protection trust is to shield those assets from creditors. Asset protection trusts are able to offer the strongest protection you can find from creditors, lawsuits, or any judgments against your estate.
There are two forms of Asset Protection Trusts. They are similar in that they are always an irrevocable asset protection trust. They differ in where they are formed and the protection they offer the owner.
Domestic trusts are established according to the law of a US state rather than according to an offshore jurisdiction. Some states have aggressive laws, but these accounts overall allow the owner to enjoy the stability of a United States account.
Overall it is less expensive to set up an asset protection trust in the U.S. as compared to a foreign asset protection trust.
Foreign asset protection trusts are also known as "offshore" trusts. Popular jurisdictions include the Cook Islands, Nevis, Caymans, and Seychelles. Even though these accounts are more expensive to set up, typically offshore trusts do not allow judgments against assets of trusts formed in their jurisdiction.
When assets are protected from judgments outside of the jurisdiction, this means that these assets will only be subject to the laws of the country in which the trust is formed. The assets cannot be seized in court cases from other countries. Despite this, the downside to a foreign asset protection trust is the potential economic and political risks associated with forming in a country that is not your own.
With a revocable trust, your assets will not be protected from creditors if you are sued. This means that you will maintain ownership of the trust while you live, allowing you to lose the contents of the revocable trust if you lose a lawsuit.
The Asset Preservation Trust is designed as a death benefit trust. This trust is able to hold the death in service, personal pension, or SIPP lump sums after death. These are typically family-controlled and guaranteed by legal partners.
In order to fund an asset protection trust, you can do so with more than just cash. An asset protection trust can also be funded with cryptocurrency, an LLC (limited liability company), securities, real estate, recreational assets like planes or boats, but also business assets. This might include intellectual property, inventory, and equipment.
The process of transferring assets to an asset protection trust is not as simple as transferring money into a bank account. The difficulty in forming an APT will depend on what you plan to fund it with. Typically it will require a financial planner and lawyer, as well as an insurance broker.
There are also other complex legal steps that need to be passed before being able to transfer assets. Each asset will need to be evaluated based on legal protection, taxation, business and growth potential, as well as how you plan to eventually distribute these assets to spouses and heirs.
An asset protection trust is best for business owners and wealthy individuals looking to protect their assets. Whether you have beneficiaries whom you want to ensure benefit from your trust, or you are concerned about your assets being seized, an ATP may be right for you.
There are two steps involved with starting an asset protection trust. The first is to create the trust document, while the second is funding the trust. It is recommended to get the help of a lawyer to create your asset protection trust document.
When creating the trust document you will need to choose a trustee and name the trust beneficiaries. You will also need to specify how the assets should be managed and held in the trust on behalf of your beneficiaries.
Funding is the last step. Here you will be required to choose the assets you want to use to fund the trust. You may want to establish a limited liability company prior to funding in order to have even more protection. At this point you will also need to understand any possible tax implications you will have due to adding assets to this trust.
An asset protection trust is designed to have a relationship with the country in which it is formed. This means it is essential to follow all local laws, and to do so carefully. Contact us before forming in order to keep your assets safe, and make the most informed choices possible.