There are many different trusts that are used for estate planning purposes, and the advantages can be beneficial to you during your lifetime in some cases. With this in mind, we will look at self-settled asset protection trusts in this post.
Creditors and Litigants
You may have concerns about potential lawsuits if you are in a high risk profession, and this can also be a looming threat for people that own businesses. There is a possible solution in the form of a self-settled asset protection trust. These trusts are alternately referred to as “domestic asset protection trusts.”
The way that it works is you fund the trust with assets that you want to protect. It is possible to convey personally owned property, bank accounts, and businesses into this type of trust.
After you establish and fund the trust, you would be surrendering incidents of ownership, because it would be an irrevocable trust. You would not be able to change your mind, dissolve the trust, and take back direct personal possession of the property.
You would name a trustee to act as the administrator of the trust. This could be someone that you know personally, but many people would use a professional fiduciary like a trust company or the trust department of a bank.
After everything has been set up properly, the assets would be protected from future creditors and certain types of litigants. The “future” qualifier is very significant, because you cannot create and fund the trust as a reaction to a legal action.
As the grantor of the self-settled asset protection trust, you would not be able to directly access the property that you conveyed into it.
However, the trustee would have the discretion to make payments of the income and/or the principal to you directly. You can also allow for distributions to other members of your family if this is your choice.
Most states in the union do not recognize these trusts, but there are 15 states that allow self-settled asset protection trusts. Ohio is one of them, so it is an option that is readily available in our state.
It should be noted that a resident of a state that does not recognize domestic asset protection trusts could establish such a trust in a different state if certain requirements are met.
The self-settled asset protection trust will shield assets from most legal actions, but there are some exceptions.
When the government is trying to collect back taxes, assets in the trust would be available to them. If a trust grantor is behind on child support, alimony, or spousal support, the resources in the trust would be in play. They can also be made available through specific court orders and judgments.
Take Action Today!
As you can see, there are steps that you can take to protect your assets, and there are solutions that can be implemented to address any and all circumstances. The ideal course of action will depend upon your unique situation, and this is why legal guidance is invaluable.
We can put you at ease, gain an understanding of your situation, and provide recommendations. When you make your informed decisions, we can apply our expertise to create the ideal plan for you and your family.
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