{"id":3949,"date":"2020-10-01T17:24:00","date_gmt":"2020-10-01T17:24:00","guid":{"rendered":"https:\/\/fusionwm.com\/?p=3949"},"modified":"2022-10-12T17:29:44","modified_gmt":"2022-10-12T17:29:44","slug":"the-role-of-trusts-in-protecting-your-assets","status":"publish","type":"post","link":"https:\/\/fusionwm.com\/the-role-of-trusts-in-protecting-your-assets\/","title":{"rendered":"The Role of Trusts in Protecting Your Assets"},"content":{"rendered":"\n
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For business owners, high-level executives, physicians and others with significant wealth, asset protection strategies can potentially be key components of an overall wealth management plan.<\/p>\n\n\n\n

The reason is an unfortunate one: People with deep pockets can sometimes be targets of frivolous, unfounded lawsuits that may put their assets, property and future financial security at great risk.<\/p>\n\n\n\n

Consider the example of the owners of a small dry cleaner who were sued for $54 million over a disagreement about a pair of pants.[1]<\/a> The business owners won, but ask yourself if you\u2019d want to go through an experience even remotely similar.<\/p>\n\n\n\n

Here\u2019s a look at ways to potentially safeguard wealth against those who might seek to take it from you unjustly.<\/p>\n\n\n\n

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[1]<\/a> Chris Francescani, \u201cTearful Testimony in $54 Million Pants Lawsuit,\u201d ABCNews, June 12, 2007.<\/p>\n\n\n\n

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Asset protection options<\/h1>\n\n\n\n

Asset protection is similar in many ways to other areas of advanced wealth planning, such as estate planning, business succession planning and charitable planning. It uses an array of legal and risk management techniques, products and structures to insulate your wealth from immoral litigants seeking to separate you from your wealth.<\/p>\n\n\n\n

For example, one such legal structure is the conventional trust, which can help shield wealth from lawsuits when used skillfully. In general, one party sets up a trust for the benefit of another party\u2014for example, you might set up and fund a trust that will benefit your minor children. The assets are controlled by the trustee (the person in charge of the trust), and based on your wishes written into the trust document, the trustee will manage the assets and provide for your minor children.<\/p>\n\n\n\n

Another option is an asset protection trust. Unlike conventional trusts, asset protection trusts are self-settled\u2014meaning that you potentially retain the beneficial use of the assets that you place in the trust. However, for the assets in the trust to be protected, the trust must be irrevocable\u2014that is, permanent. You cannot just change your mind one day and take out all the assets.<\/p>\n\n\n\n

At the same time, you do not control the assets in the trust. Thus, if you are sued, the money and property in your asset protection trust are actually not yours and under your control. Therefore, they can be safe from litigants suing you.<\/p>\n\n\n\n

Important:<\/strong> Asset protection trusts are not designed to \u201chide money\u201d from the world or to keep money blocked against legitimate claims, as some people mistakenly assume. To the contrary, for asset protection trusts to work, they must be out in the open and evident\u2014that way, they can send the message that people pursuing unjust lawsuits are likely to come away with little to nothing.<\/p>\n\n\n\n

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A look at domestic versus foreign trusts<\/h1>\n\n\n\n

Broadly, there are two kinds of asset protection trusts: domestic (set up in a selected U.S. jurisdiction) and offshore (set up in a selected non-U.S. jurisdiction).<\/p>\n\n\n\n

When it comes to domestic asset protection trusts, a number of states have enacted laws that permit some form of self-settled trusts. As of this writing, some of these states are:<\/p>\n\n\n\n