Estate planning is a complicated endeavor, with many nuanced financial products available to meet a variety of needs in the marketplace.Trusts are some of the most interesting and complex tools available for estate planning, each with their own function and special rules, allowing them to use the law to your advantage when created properly and used wisely. While many estate plans focus on protecting assets from the probate process after a person passes away, an asset protection trust has a slightly different function.
Asset protection trusts function primarily to protect an individual's assets from creditors. In many cases, asset protection trusts are established somewhere outside of the country, to limit the jurisdiction of a creditor to pursue payment. If you have ever heard someone in a movie talking about how they stored everything "in the offshore accounts," they may be referring to just such a trust.
The benefits of an asset protection trust generally imply a certain degree of unwieldiness. To keep your assets safe from creditors, it is usually necessary to establish the trust as irrevocable, so that you have legally limited access to the underlying assets. Furthermore, if you set up an asset protection trust, you have to relinquish all legal ownership, usually for a set number of years, and cannot be a current beneficiary. However, it is possible to direct the trust to make distributions to others without creditors having access.
If you believe that an asset protection trust may be right for you, do not hesitate to consult with an experienced attorney. The guidance of an attorney with years experience creating high-calibre estate plans can help ensure that your estate planning needs are met while your rights remain secure.
Source: findlaw, "Types of Trusts," accessed April 21, 2017