All about asset protection trusts

A trust is the legal term for a contract that bequeaths assets between a person (the grantor), and the receiver of the assets (the trustee). Asset protection trusts are trusts that can cover any hold on payable monies in the financial world. Although taxation, bankruptcy and divorce are typical reasons for these trusts, they are used for many different purposes.

Reasons for asset protection

One of the most popular asset protection strategies is to protect your current assets from creditors in a lawsuit. This is a good strategy, if you fear that your assets are in danger of being taken from you by way of garnishments, liens, levies, judgments, or any other similar kinds of lawsuits. If an individual possesses enough assets, an asset protection plan may interest that individual. This type of planning usually involves an expert who can help you to form a detailed and descriptive trust that safeguards your possessions in the event of death or bankruptcy. As this can be costly, you must have your possessions appraised in value to ensure that an asset protection expert would be worth the funds charged for his or her services. Assets abroad: International trusts
Asset protection trusts are managed by the laws of the issuing jurisdiction. For example, if a grantor lives in Nebraska, but grants assets to a trustee who lives in Colorado, the state laws of Nebraska would govern the trust. For offshore trusts, the assets are managed by the country, or island offshore. Given a negative connotation, many investors employ offshore asset protection to protect their funds internationally, and not to evade tax laws within their residing country. Although lower taxes are often paid on trusts established outside of the United States, diversifying funds internationally are considered the plausible course of action regarding offshore asset protection.

Revocable and irrevocable trusts

An irrevocable trust signifies the transferring of the specified assets to another person altogether. The grantor no longer has rights to the assets. The irrevocable trust is the most common trust used in comparison to revocable trusts. This trust also diminishes estate taxes, and helps to defer other taxes like capital gains or income taxes. The revocable trust is used when a person directs a particular use or control over the assets, but who still owns the assets. The trustee simply manages the assets for the grantor which can be based on any reason that the grantor deems necessary. The revocable trust does not impact the taxes paid on assets whatsoever as the ownership never transfers to another person.