Asset Protection Planning is a broad term used to describe the many methods by which an individual, family or business can preserve their wealth from claims by creditors. The creation of an asset protection trust is just one of many ways to protect your assets from creditors. It can also be one of the more expensive options which most people do not really need.
There are primarily two types of asset protection trusts. The first type of trust is one in which a person creates the trust for the benefit of himself or herself. This is known as a self-settled asset protection trust. At common law, it was impermissible to put your own money in a trust to protect it from creditors. Even today, only a few states in America allow these types of trusts, so it is not uncommon for many wealthy individuals to create an offshore asset protection trust.
The second (and more common) type of trust is one in which a person creates a trust for the benefit of other people, usually the person's heirs. This is known as a third party asset protection trust. Third party asset protection trusts are frequently created in conjunction with a client's overall trust plan. Specifically, it is quite common to form a life insurance trust as an asset protection trust. There is usually no need to send third party asset protection trusts offshore as they are highly protected from creditors. However, a tax advantage may be had by creating them in another country.
Generally, in both types of trusts, money can only go to the beneficiaries at the discretion of the trustee. Additionally, the trustee must be an independent party. Beneficiaries have no (or limited) rights to take the trust money for themselves and they cannot assign their interest in the trust.
At the Law Office of Kevin A. Pollock LLC, we counsel clients about asset protection planning techniques which have the effect of placing assets beyond the reach of unknown future creditors to the extent legally and ethically possible. Legitimate asset protection planning does NOT involve hiding assets, using secret agreements or making fraudulent transfers. Rather, asset protection planning combines sophisticated and legitimate business planning, tax planning and estate planning techniques which result in wealth preservation.
We WILL NOT help you to transfer assets subject to a claim from an existing creditor, so please do not ask