Individuals that are in certain high-risk professions often fall into this category. These would include doctors, attorneys, real estate developers, architects, and some others.
If you would like to protect your assets from future claimants, there is a legal device that may be the right choice for you.
Self-Settled Asset Protection Trust
Under these circumstances, you could choose to convey assets into a self-settled asset protection trust. These trusts are sometimes referred to as “domestic asset protection trusts.”
The way that it works is you fund the trust, and you name a trustee to act as the trust administrator. This would be an irrevocable trust that you cannot dissolve at any time, and you would not have the ability to change the terms of the trust. You would have no direct access to the resources.
Any adult that is willing to assume the role can technically act as a trustee, but many people go in a different direction. Trust companies and the trust departments of banks provide professional fiduciary services.
There is one key piece of information about the trustee. These trusts are not legal in New York, so you would have to establish the trust in a state that allows them. The trustee must reside in that state, and this is a reason why you would probably have to use a professional.
If creditors or litigants open claims against you when you establish the trust, the assets would not be protected. The protection only extends to actions that are taken after you have created the trust.
You can receive monetary distributions of assets in the trust at the discretion of the trustee. It is also possible to allow the trustee to distribute resources to other people that you name in the trust agreement.
The protection that you gain when you convey assets into this type of trust is not absolute. If you have family support obligations, the assets in the trust would be fair game.
The same thing is true for tax responsibilities, and a court may have the ability to issue an order that would pry funds loose under some circumstances. Some court judgments against the grantor could be able to penetrate the trust depending on a number of different factors.
Download Our Estate Planning Worksheet
We have hundreds of posts on this blog you can explore to learn more about estate planning, and there are other resources on our site that you can tap into free of charge. One of them is our worksheet, and it has been carefully prepared to give you some added insight into the process.
You can learn a lot if you take the time to go through it, so we urge you to access your copy. To do just that, visit our worksheet access page and follow the simple instructions.
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If you are ready to discuss your estate planning goals with a licensed attorney, we are here to help. Personalized attention is the key to a well-constructed estate plan, and as this post demonstrates, there are some very useful tools in the toolkit.
We would be more than glad to gain an understanding of your unique situation and explain your options to you. Once you give us the green light, we will get to work on a custom crafted plan that is ideal for you and your family.
To set the wheels in motion, give us a call at 631-265-0599. If you would prefer to reach out electronically, simply fill out our contact form and we will get back in touch with you promptly.