Asset protection trusts are a financial-planning trust vehicle. These allow you to place your assets into a trust, in order to shield them from creditors. A Wyoming asset protection trust (APT) is the strongest protection that you can find. You might want to establish this type of trust if you are worried about your assets being a part of a settlement or a court judgment against your estate.
How Asset Protection Trusts Work
There are many types of trusts, but an asset protection trust is different. APTs specifically shield your property against creditors and they are irrevocable.
Essentially this means that because they are an irrevocable asset protection trust, any assets transferred into the trust will be permanent. No matter what occurs, the trust would own the assets, and can only be managed by the trustee. Technically, they will no longer be in your ownership which, in turn, protects those assets.
The opposite would be a revocable asset protection trust, meaning that the trust terms can be changed at any time.
Two Types of Asset Protection Trusts
There are two main types of asset protection trusts: domestic asset protection trusts and foreign asset protection trusts.
- Domestic asset protection trusts: In the United States, a domestic asset protection trust offers flexible laws. They can also be set up in order to provide asset protection for Medicaid planning or a special needs beneficiary. This means that if you will need to use Medicaid in order to pay for long term care, this might help you become eligible. Special need asset protection can also make it possible to qualify for government benefits.
- Foreign asset protection trusts: More often known as foreign asset protection trusts or “offshore” trusts, these trusts are typically held in a foreign account. The main difference between these trusts and domestic trusts is that your trust will be governed by the laws of whichever country you established it in. Another benefit is that if a creditor wins against you in a U.S. court, it may not be enforceable according to the laws of the country your trust exists in. You also may be able to qualify for higher privacy laws.
Benefits of an Asset Protection Trust
Protect Assets from Lawsuits and Creditors
The most important benefit of an APT is that you can protect your assets from creditors regardless of what happens. No one ever plans to be sued, but if it does happen you can ensure that your assets will be safe.
Safeguard Assets for Beneficiaries
Although you cannot move your assets once they are placed into the trust, it does ensure that they will be safe for your beneficiaries in the event of your sudden death. It is also a protection for your beneficiaries should you suddenly run into legal trouble.
Allow Your Heirs to Skip Probate
The probate process can be frustrating for your heirs after you pass away. Essentially, probate is the process in which the executor will collect your assets, pay off your debts, and then distribute your assets to your heirs according to your will. Although this is never something you want to think about, helping your heirs avoid the probate process will not only save them time but also money and heartache.
Protect Your Business
When you use an APT you give yourself protection against any claims such as personal injury claims that occur in your life. You will also protect your business in the event you default on any type of personal loan.
Funding an Asset Protection Trust
Although you can fund an asset protection trust with cash, you can do so with much more. This might include real estate, LLCs, and other assets. It should also include your saving accounts, investments, business interests, and any notes payable to you.
Should You Start an Asset Protection Trust
You might want to consider an asset protection trust if you have a high net worth. This will provide you with the knowledge that your assets are safe regardless of what happens in your life. Additionally, if you own businesses, an asset protection trust can prove essential. By assuring that your personal assets are safeguarded against creditors, your assets will be safe for your beneficiaries.