Asset protection trusts are trusts designed to protect a person’s assets from creditors or litigation. People who work in industries where lawsuits are common are more likely to require these types of trusts. If you’re considering asset protection as part of your estate plan, what should you keep in mind? Here are three major rules to set up an asset protection trust that you can discuss with an estate lawyer, like from the Yee Law Group.
Start Your Plan in Advance
Estate planning is always best when you plan in advance. Do not wait until the last minute. You should never establish an asset protection trust when the claim arises. You want to establish one well in advance. Do not wait for litigation to come to you. If you establish the trust when the claim arises, the law may see it as a fraudulent transfer. Essentially, you are not allowed to hide or protect your assets just because you have a lawsuit against you.
Do Not Replace Your Insurance
Your asset protection plan should not replace your liability insurance. Most people who look into asset protection work in an industry where lawsuits are common. The medical, finance and legal fields are common areas where lawsuits occur. The asset protection trust will not pay your legal fees. It will not help you in the case of a lawsuit. While your assets within the trust are safe, this does not mean that all of your assets and wealth are safe. You still need insurance to protect yourself in the case of a lawsuit.
Relinquish Some Control
It can be difficult to let go of control. Most people have anxieties over losing control of their assets. They do not want to make the wrong decision regarding their wealth. You cannot keep complete control over your assets, however, if you want to put them into an asset protection trust. If you have control, then this means that you still own the assets. When you own an asset, creditors and others who may file claims against you can access those assets. An asset protection trust has to be a balancing act. You do have some control, but not enough that the assets are no longer protected from creditors.
If you are someone who works in an industry where litigation is common, then you must consider an asset protection trust. To create an asset protection trust that is not only valid but protects your wealth, consult with an estate planning lawyer.