Protecting assets and ensuring that children and grandchildren have access to your legacy is an important part of estate planning. Many parents, looking at what their children are currently doing, want to ensure that their assets provide a benefit and are protected from creditors, their own and their children’s. There are many legitimate reasons to do this. Certain professions, such as medical professionals and corporate executives, find themselves facing lawsuits where plaintiffs try to reach beyond their insurance into their personal assets.
Other Asset Protection Options
While trusts are a powerful option to protect assets, there are other methods, depending on the asset type and your personal goals. Retirement accounts, life insurance, annuities, and other mechanisms can also be used to help you meet a goal and pass your wealth directly to the individual you’re interested in helping. These can be particularly useful with grandchildren when you want to pass wealth to them in a way that cannot be circumvented by their parents.
Using a Trust to Safeguard Assets
Certain states, including Utah and Nevada, offer asset protection trusts (“APTs”). Referred to as a Self-Settled Spendthrift Trust, these trusts protect their beneficiaries and assets from creditors. It is not necessary to be a resident of the state in order to take advantage of these trusts. APTs involve transferring the assets for a particular trust into a trust that is run by an independent trustee. The trustee follows your instructions, but helps shield your assets from most creditors..
APTs must be irrevocable, so once you put assets into the trust, you cannot move them out. Distributions happen at the trustee’s discretion. Generally, at least some of the assets in the trust have to be located in the state in which the trust is set up, as must the trustee, trust administration and documentation.
Nevada APTs have spendthrift provisions specifically preventing creditors from reaching into the trust. In Nevada, you can remain a beneficiary of the trust and name other successor beneficiaries. Assets transferred into the trust are secure from creditor claims once they have been in the trust for two years or, if it is an existing creditor when the trust is set up, six months after the creditor should have discovered the transfer. Utah’s APTs have similar standards.
Deciding the right path to take with your assets to protect them and provide a legacy for future generations is a serious job. At Dunn Law Firm, we take the time to get to know you and your specific situation in order to create a comprehensive estate plan that meets your goals. To learn more, reach out to the Dunn Law Firm by calling (435) 628-5405 to set up a free consultation today.