Things to Know About an Asset Protection Trust

When it comes to estate planning and financial planning, you may always be looking for another strategy to save money and protect your assets.

This is why a growing number of people are looking into an asset protection trust. If this sounds familiar, it’s time for you to learn more. It’s time for you to consider if this could benefit you and your family, either now or in the future.

Investopedia shares a comprehensive definition of an asset protection trust, noting the following:

“A vehicle for holding an individual’s assets to shield them from creditors. Asset protection trusts allow, if it is difficult for a creditor to seize assets, settle with the debtor on favorable terms instead of engaging in costly litigation. This vehicle has complex regulatory requirements, such as being irrevocable and contains a spendthrift clause. An asset protection trust does provide for occasional distributions, but those distributions must only occur at an independent trustee’s discretion.”

As you can see, there is nothing simple about an asset protection trust. While this may be something you want to consider, thanks to the many benefits, it’s not a trust that you create today and forget about in the future. Instead, you need to know exactly how it will impact your situation.

Before we go any further, it’s important to note that asset protection trusts are only allowed in a few states in the US. For this reason, you may need to get creative if this is something you’re interested in using to your advantage.

For now, these are the only states that allow for asset protection trusts:

• Alaska
• Delaware
• Nevada
• South Dakota
• Rhode Island
• West Virginia
• Virginia
• Mississippi
• Ohio
• Hawaii
• New Hampshire
• Tennessee
• Wyoming
• Missouri
• Oklahoma
• Utah

If you live in one of these states, you’re in business. You can consult with an attorney and learn more about the process of creating an asset protection trust.

Conversely, if you don’t live in one of these states, you’re faced with some challenges. It doesn’t mean that you can’t take advantage, but it does mean that you’ll need to put in some extra work.

More specifically, you have the right to establish an asset protection in one of the above states, even though you are not a resident.

If you decide to create an asset protection trust in another state, keep the following in mind (shared in a recent Forbes article):

“If you do go out of state, the more ties you have to that state, the better. For example, a New Yorker who has a vacation house in New Hampshire might set up a DAPT in New Hampshire, McDonald says. In order to build a record to stand the best chance of defending a challenge to your DAPT, visit the state where you set it up, sign documents in person there, and make asset transfers.”

Questions to Answer

Now that we’ve discussed a variety of details related to an asset protection trust, it’s time to address any questions that may be on your mind. Some of the most common include:

• Are the benefits of an asset protection trust worth the time and money that it will take to setup?
• What are the first steps to take if you don’t have the ability to setup this type of trust in your home state?
• Is it possible to create an asset protection trust alone, or is it best to consult with a legal professional?

These types of questions can point you in the right direction, allowing you to better understand what you should be doing.

Are you thinking about creating your own trust or will? While this sounds like a good idea, especially if you are in a hurry, it’s not typically something you want to consider.

To learn more, download our free report entitled “Dangers of Do-It-Yourself Wills and Living Trusts.” With this, you’ll quickly learn more about the many dangers of taking on this process without legal assistance.

If you’re ready to create a will or any type of trust, think twice before you do so alone. In the end, this often costs you more time and money than simply consulting with an attorney.

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Stephanie Thompson, Estate Planning Attorney of Krueger Hernandez & Thompson SC

As the owner of Krueger Hernandez & Thompson SC, it is Stephanie’s mission to address each client’s goals for their estate plan. By identifying their wishes and concerns she can educate, guide, and counsel on the different tools and options that will effectively and efficiently accomplish those goals.

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