Asset protection trusts are an excellent way to protect your income and assets from risks like lawsuits, creditors, or taxes. By setting up a trust, you can keep control of your property and secure them for the long run.
Learn about the rules and guidelines that go along with asset protection trusts. Read on to see the complete picture of what they are for, what they can do for you, and how a trust lawyer can help.
What Is An Asset Protection Trust?
An asset protection trust is a legal arrangement that lets people move their assets into a trust to protect them from possible risks in the future. These risks include lawsuits, creditors, divorce settlements, or other financial obligations.
Types Of Trusts
People commonly use revocable and irrevocable trusts for asset protection in estate planning. These are valuable tools to safeguard your assets from potential creditors, legal claims, and other financial risks. Learn about the rules for revocable and irrevocable trusts and their pros and cons for protecting assets.
Revocable Trusts
A revocable trust, also called a “living trust,” allows the owner to change or cancel the terms of the trust while they are still alive. In this type of document, the assets are in the trust, but they still have control over them and can change the conditions or get rid of them if they want to.
Benefits Of Revocable Trusts
Revocable trusts offer two key benefits for asset protection. First, they give the grantor flexibility and control by letting them change the terms of the trust or cancel it altogether if they need to.
Second, revocable trusts help people skip probate. When the owner passes away, the assets in the trust can be given to the beneficiaries without going through this process. It makes the transfer of properties faster.
Drawbacks Of Revocable Trusts
While revocable trusts offer numerous benefits, they provide limited protection against potential creditors. As the grantor retains control over the assets, the trust’s assets are generally considered part of the grantor’s estate and can be subject to claims from creditors.
Irrevocable Trusts
Irrevocable trusts, as the name suggests, can’t be changed or canceled without the heirs’ permission. Once the property is in an irrevocable trust, the grantor gives up ownership and control.
Benefits Of Revocable Trusts
Irrevocable trusts are a great way to keep your assets safe. First, they offer better protection from creditors because the trust assets are no longer under the grantor’s name.
Second, it can help plan for estate taxes by lowering the amount of taxed estate. Since the assets are no longer part of the grantor’s estate, they may not be taxed when the grantor dies.
Drawbacks Of Revocable Trusts
There are some issues with irrevocable trusts when it comes to protecting assets. First, there is a loss of control because once the assets are in the trust, the owner no longer has control over them.
Additionally, permanent trusts are not very flexible because they are hard to change or cancel. The grantor needs to think carefully about what could happen in the future and plan the terms of the trust properly since making changes later may be challenging.
Seek Help From An Estate Planning Attorney
When securing your hard-earned assets, seeking the guidance of an experienced estate planning lawyer is crucial. A trust attorney well-versed in asset protection trusts will work closely with you to understand your goals and concerns.
Keystone Law Firm can be your trusted partner in asset protection. By seeking their legal knowledge, they can assist in selecting the most appropriate option for your asset protection goals.
Summary
Asset protection trusts are valuable for safeguarding income and assets from risks like lawsuits, creditors, and excessive taxation. Revocable trusts offer flexibility and control but limited creditor protection. Irrevocable trusts provide better creditor protection and potential tax benefits but involve a loss of control and flexibility. Careful planning is necessary for both types of trusts, and consulting a trust attorney can help.