The Advantages of an Asset Protection Trust
As you work on your estate plan, you might come across several products and terms that you don’t understand. One of those could be an asset protection trust. Just as it sounds, this product protects your assets from the grasp of creditors, but you have to set it up right for it to work. What are the advantages of an asset protection trust?
Protection Against Traditional Creditors
One of the main reasons individuals choose to set up asset protection trusts is to protect their personal assets from the hands of greedy creditors. Not everyone can pay back the credit card company, and the creditor might come after the individual’s personal assets. If placed in a trust, that creditor might not have access to the asset.
Protection Against Future Liabilities
Imagine that someone has a high-risk job that exposes him or her to certain future liability risks. For example, a surgeon could possibly face a lawsuit in the future if he or she messes up a surgery. If the surgeon has already placed certain assets in a trust, then when someone sues the surgeon, those assets won’t be taken to settle the lawsuit.
Protection of Inheritance
If an individual has children who can’t be trusted with money, the individual might choose to set up an asset protection trust so the child can’t inherit everything all at once. Perhaps the child is a spendthrift or a drug addict. The parent can place money and assets in a protection trust so the child gets only a certain amount at one time. This can help the child to manage his or her inheritance more appropriately.
Protection in a Marriage
Going into a marriage, many individuals fully trust their future spouse, but there are those situations in which that security isn’t completely valid yet. An asset protection trust could be used as a type of prenuptial agreement. You can place certain assets in the trust so your spouse has no access to them.
What You Should Know Moving Forward
Keep in mind that not all states favor asset protection trusts, and most trusts are subject to taxation at some point. Sometimes there is a public policy that protects creditors instead of debtors. This is one of the reasons why you may need to work with an estate planning lawyer in Palatine, IL. Your lawyer can help you understand the different products you can include in your estate plan so your assets are as protected as possible. An example of an experienced firm working with estate planning is Bott & Associates, Ltd.