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ASSET PROTECTION TRUST


Although foreign asset protection trusts might provide effective protection from a U.S. court-ordered seizure of assets, they also expose the assets to potential economic and political risks associated with the jurisdiction in which the offshore account is held.




ASSET PROTECTION TRUST


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By contrast, the Foreign APT, which is also commonly known as an Offshore Trust, would be created outside of the United States. They cost more to establish, but have enhanced privacy protection and can potentially offer tax benefits, making them more effective.


In general terms, a Revocable Trust simply means the document can be changed any time you like, as often as you see fit. Irrevocable, on the other hand, cannot be easily altered, if it can be changed at all. That said, in order to truly provide effective asset protection, a Trust must be irrevocable.


An asset protection trust guards your resources from creditors. This type of trust is created by an individual and is irrevocable, meaning once the assets are in the trust, they cannot be removed or put elsewhere.


A domestic asset protection trust is established within the U.S. Note that since these are a relatively new type of trust, not all states allow them to be established, and states that do allow them have varying rules.


Also keep in mind that these trusts cannot shield assets from a claim that is already outstanding at the time it is established. For example, if a credit card company sues you for $10,000, you cannot put a portion of your assets into a domestic asset protection trust in an effort to keep the creditor from recovering that money.


A foreign asset protection trust (also referred to as an offshore trust) is set up outside of the U.S. This type of asset protection trust is governed by the laws of the country in which the trust is set up. Common countries for foreign asset protection trusts include the Cayman Islands and Bermuda.


While foreign asset protection trusts typically provide more security for your assets and are harder to locate, they are more expensive to establish than a domestic asset trust. They also sometimes require creating a company during the process, which can trigger tax implications. Additionally, a foreign asset protection trust is subject to any risks associated with the foreign country in which it is held, such as economic and political risks.


Setting up an asset protection trust requires working with an experienced estate planning attorney. This kind of professional knows the intricacies of how the trusts work and what the trust laws in your state may be.


Asset protection trusts are a type of trust that shields assets from creditors and lawsuits. There are various types of asset protection trusts, including both domestic and foreign trusts along with special Medicaid asset protection trusts. Individuals considering a trust should work with a qualified estate planning attorney to help them navigate the process of setting up and maintaining a trust as well as understand any tax implications that may be involved.


One powerful estate planning tool is the asset protection trust. As its name suggests, an asset protection trust helps keep your assets out of reach of creditors. However, such a trust needs to be properly established in order to provide the protection you're looking for.


Generally speaking, if asset protection is your goal, a revocable living trust is not the proper vehicle for your purposes. The settlor, or person who creates the trust, essentially retains control and ownership of the trust's assets, meaning they can remove assets from the trust or change the trust terms at any time, while the trust itself simply holds title to the assets. In the event a creditor wins a lawsuit against the settlor, the court can order the payout of trust assets in settlement of the creditor's claim.


Although revocable trusts do not offer asset protection, they have other benefits when it comes to estate planning. For example, such trusts can be helpful in avoiding probate fees when the settlor passes.


In order to properly protect your assets, you need an irrevocable trust. As its name suggests, once such a trust is created, you cannot revoke it yourself by changing its terms, nor do you have control over the trust's assets.


Instead, the trust's assets are in the control of the trustee, or person assigned to manage the trust, and any changes or distributions are at the trustee's discretion. If a creditor files a lawsuit against you, the assets in the trust will likely not be considered yours, so even if the creditor wins judgment against you, the chances are much better that the assets residing in the irrevocable trust will be protected.


There are two kinds of irrevocable trusts that work as asset protection vehicles: domestic asset protection trusts and foreign asset protection trusts. A domestic asset protection trust can be established within the U.S. in any of the states that provide legislation permitting the creation of such trusts. Not all states provide for asset protection trusts, so it's important that you consult with an estate planning adviser or online service provider to determine which state, if any, is best to set up such a trust. However, as these trusts have become more common, more and more states have come to recognize the legal status of such trusts.


Note that it is less costly to set up an asset protection trust in the U.S. than it is to create a foreign asset protection trust. Because these trusts are fairly new, the case law concerning their treatment is constantly evolving, which adds a level of uncertainty to their ability to properly protect assets. Most states have a limitation period during which assets transferred into such a trust remain vulnerable to creditors.


The foreign asset protection trust, also known as an offshore trust, provides more effective protection for your assets. Such trusts are established in jurisdictions outside of the U.S., such as the Cook Islands, which provide more stringent protection for trusts and their assets. Because your trust is in a foreign jurisdiction, it's governed by the laws of that jurisdiction rather than by U.S. laws.


Although they are usually more costly than their domestic counterparts, foreign asset protection trusts generally have more stringent privacy measures, making it harder for others to learn the trust terms and assets. Another benefit is that jurisdictions that promote themselves as offshore trust havens usually do not enforce U.S. judgments against assets of trusts formed in their jurisdiction.


In many cases, assets of a foreign asset protection trust are held in an offshore account. While this provides more protection from a U.S. court-ordered seizure of assets, it does expose the assets to potential economic and political risks associated with the jurisdiction in which the offshore account is held.


While one of the primary purposes of an asset protection trust is to protect the settlor's assets from creditors' claims, such a trust can also be used to help make you eligible for Medicaid by reducing the assets in your name. If you are planning to set up a trust for this purpose, it's important to consult with an adviser with experience in this area, as not every trust can help you comply with Medicaid's eligibility requirements.


An asset protection trust is irrevocable, meaning that any transfer of assets into the trust is permanent. In other words, the trust would own the assets in question and they would be managed by the trustee. By removing those assets from your ownership, you can protect them against creditor lawsuits.


There are two kinds of asset protection trusts you can set up, depending on your needs and where you live. Domestic asset protection trusts can only be established in states that have laws which allow them. A foreign asset protection trust is essentially an offshore trust you can set up in jurisdictions outside the U.S.


Domestic asset protection trusts can be set up for a singular purpose, such as asset protection for Medicaid planning or asset protection for a special needs beneficiary. If Medicaid is necessary to help pay for long-term care, this kind of trust may be necessary to be Medicaid-eligible. A special needs asset protection trust could also make it easier to qualify for government benefits.


An asset protection trust is something you might consider if you run a business, for example. You would have protection against personal injury claims as well as creditor lawsuits if you end up defaulting on business loans or lines of credit for any reason. You may also consider this kind of trust if you have a higher net worth and you simply want to ensure that your assets are safeguarded against creditors for your beneficiaries.


In general, trusts also make it possible for your heirs to skip the probate process once you pass away. Probate is a legal process in which an executor collects your assets, pays off any lingering debts and then distributes remaining assets to your heirs according to the terms of your will or state inheritance laws should you die intestate. Probate can be lengthy and costly but an asset protection trust would allow your heirs to avoid it for the assets included in the trust.


Finally, setting up an asset protection trust can be time-consuming, not to mention expensive in terms of the attorney fees involved. You also have to factor in the ongoing fee which is paid to the trustee for performing his or her duties.


Asset protection trusts are more complex than other types of trusts and for that reason, it may be helpful to work with an estate planning attorney in creating one. Generally, there are two basic steps involved: creating the trust document and funding the trust.


Funding an asset protection trust is where things can get a bit more complicated. Depending on the type of assets you plan to transfer to the trust, it may be necessary to establish a limited liability company prior to funding. You would also need to consider any potential tax implications of adding assets to this type of trust. 041b061a72


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