An asset protection trust is a type of trust designed for the purpose of protecting your assets. This type of trust involves a number of legal techniques to protect assets from specific types of threats.
When drafted properly, an asset protection trust can provide the following benefits:
- ensure funds are not used for substance abuse or addictions
- ensure some money is preserved for your grandchildren
- minimize taxes for your estate and beneficiaries
- prevent a spendthrift beneficiary from wasting the assets
- prevent funds from going to ex-spouses of your children (if they get divorced in the future)
- protect assets from your potential future creditors
- protect assets from nursing home and other long-term care costs
- protect assets if your beneficiaries get sued, have financial trouble, file for bankruptcy, or encounter similar problems
- provide asset protection for your surviving spouse
- require your spouse to sign a prenuptial agreement if you pass first and your spouse remarries
- support your legacy (you can pass along your story, your values, and your wisdom, often the greatest gift you can leave)
Customized to Your Concerns
An asset protection trust is a bespoke document, drafted by an attorney to specifically address your concerns, risks, and circumstances. While all of these protections sound beneficial, many of them involve some trade-offs. An experienced trust attorney can discuss your concerns, and explain the pros and cons, so your trust is tailored to your unique circumstances.
Revocable or Irrevocable?
An asset protection trust may be irrevocable from the beginning. However, an asset protection trust may begin as revocable, with parts of the trust converting to “irrevocable” upon the occurrence of a triggering event. For example, a common triggering event is the passing of your spouse or you. It is common for a trust to be labeled “revocable,” even though it becomes partially or fully irrevocable at a point in the future.