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use a trust to protect1090 .pdf


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use a trust to protect
In the USA, there is a perennial risk of incurring a frivolous lawsuit. As a result, more and more
people with assets to protect are turning to asset protection strategies to insulate them from these
risks. An irrevocable trust is one strategy commonly used to protect assets.

A trust is a legal entity wherein one party can store assets for the advantage of another party. The
person who donates the assets to the trust is considered the grantor or settlor, while the person
who receives the benefit is referred to as a beneficiary. The most prevalent type of trust seen is
that the children are the beneficiaries and their parents adopt the role of settlor.
Trust assets are managed by a third party, a trustee. The trust property is controlled by the
trustee, but they must abide by the rules that are contained in the trust agreement. Typically, the
state in which the trust is established will have stringent rules that the trustee must follow
concerning their duties in protecting the assets of the trust.
There are two types of trusts-irrevocable and revocable. The revocable trust is frequently used as
an estate planning tool, as it can be cancelled by the settlor at any time. The revocable trust is
rendered quite inappropriate for asset protection due to the ease with which the settlor can
retrieve the assets.
Being that the trustee assumes all contol of the trust property from the settlor, the irrevocable trust
is a much stronger asset protection mechanism. As a general rule, the assets in an irrevocable
trust cannot be part of a lawsuit judgment. If the trust should be set up so that the settlor or the
beneficiary is also the trustee, asset protection will be nil.

This type of trust will require the trustee to be very conscientious when depositing assets into an
irrevocable trust. Any deposits into the trust can be categorized as fraudulent conveyances and
cancelled by a court, should they determine that the transfers were related to a forthcoming illegal
activity or lawsuit. Therefore, experts advise establishing such a trust well ahead of any possible
litigation.
Care also needs to be taken when initiating a irrevocable trust for tax objective. Irrevocable trusts
do have to file income tax returns and actually pay a higher rate of tax than normal personal rates.
Further, any gifts to a trust can be categorized as such and therefore be subject to the estate
and/or gift tax laws. There are ways of structuring these transactions to remove the property from
an estate without triggering taxes such as creating an intentionally deficient grantor trust;
however, these trusts often lose their asset protection value.

www.wfplaw.com
For anyone searching for a way to protect their loved one's prospects regardless of any possible
health issues or legal issues, irrevocable trusts can be extremely valuable. The counsel of either a
tax or an asset protection attorney, or both, is advised before deciding if an irrevocable trust fits
your particular situation.asset protection attorneys Fort Lauderdale


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