If you have a valuable estate and want to protect your assets from creditors and lawsuits, then you may want to consider setting up one or more asset protection trusts. These trusts can shield a variety of assets, both tangible and intangible, from being seized if you become involved in a lawsuit and a judgment is made against you. However, before you set up such a trust, it can be important to understand how they function, where they are considered viable, and to what degree they can protect your finances.
About Asset Protection
Asset protection trusts are often used by those who have a considerable amount of wealth, own valuable real estate or want to protect certain assets before entering into a marriage or other partnership. A variety of assets can be protected under this type of trust, including:
- Business real estate and profits
- Cash accounts
You may want to ask your attorney about how to protect future assets with this type of trust and whether any money you make outside the state of an asset protection trust qualifies for transfer.
Asset Protection Trust Jurisdictions
Not all states allow for the creation of these types of trusts, so this may be something to consider before you approach an attorney for assistance. Around one dozen states allow asset protection, including Tennessee, Wyoming, and Ohio. In most cases, laws about asset protection apply to the state of their creation instead of your state of residence; however, some judges reserve the right to rule based on where you currently reside when it comes to seizing your assets, especially if you reside in a state that does not recognize these trusts.
Asset Trusts and Taxes
Some asset trust plans may help reduce or eliminate state taxes on certain items held within. This can apply to real estate taxes in particular, which may be helpful if you plan to transfer ownership to a benefactor in the near future. State tax laws can vary widely, so it may be wise to speak to your attorney about which tax laws apply to your asset protection plan.
Most asset protection trusts are not revocable, which means they usually cannot be altered once formed. You may be able to transfer or distribute certain assets to your beneficiaries but only at certain times and with the approval of your trustee.
Asset trust protection can shield your finances against court judgments, but only if you understand how they function and where they are legal. Speak to an attorney, like an estate planning lawyer in Memphis, TN, today for further information and assistance.
Thank you to the experts at Wiseman Bray, PLLC for their insight into estate planning and the law.