How Does an Asset Protection Trust Work?

An asset protection trust is a generic term used to describe different kinds of trusts that provide different protections for your personal wealth. An asset protection trust can keep your assets safe in lots of different ways, depending upon the kind of trust that you create. The type of trust you create is going to be determined based on what the biggest risk factors are for loss in your life. 

Nirenstein, Horowitz & Associates provides assistance with the creation of asset protection trusts. We will work with you to assess your sources of risk and to decide which trust makes the most sense for your needs. Give us a call today to get a Connecticut trusts lawyer to help you create a trust so your assets will no longer be so vulnerable to loss.

How Does an Asset Protection Trust Work?

Trusts, in general, work to protect assets by structuring the ownership of those assets in strategic ways. When you create a trust, you transfer property into it. This is called funding the trust. Once you have formally transferred your property into a trust, the trust owns the property. Depending upon the kind of trust you have created, you can transfer lots of different kinds of property into it. This could include real property, personal property (your possessions like cars and jewelry), an interest in a business, and more.

The trust is the official owner of the property, but of course the trust itself is just a legal structure that you create with a trust document. As a result, you also need to determine who is going to control the property and who the property will be used to benefit. Because a trust separates out ownership, possession, and control, it keeps property safer.

The person who controls the property when you create a trust is called a trustee. The trustee has a fiduciary duty to act in the best interests of the trust and its beneficiaries. A fiduciary is not allowed to make decisions out of his own self-interest or for his own purposes but has to do what is right to accomplish the purposes of the trust.

The person who the trust is created to benefit is called the beneficiary. You can name one or more beneficiaries, depending upon who you want the trust to provide for.

Protecting Your Assets Using a Trust

An asset protection trust provides legal protections in many different ways by separating out ownership and control. The specific protections that you can get from trust creation will vary depending upon what kind of trust you can create.

For example, with an irrevocable trust, you can give up control over your assets and no longer own them. As a result, creditors may not be able to get at those trust assets if they pursue a case against you since those assets are not yours any more. With a revocable living trust, on the other hand, you still have control over trust assets and you don’t get any protection from creditors, nor do you avoid estate tax.

However, a revocable trust can still provide important forms of asset protection because you can name a backup trustee to manage your assets if something happens to you so the assets won’t be at risk in the event of incapacity. A revocable trust can also facilitate a timely transfer of the trust assets to new owners after your death instead of those assets being in limbo during a lengthy probate process . This can be important to protect the value of certain assets.

An experienced attorney can discuss with you what your goals are for asset protection and can help you to create the right type of trust that will fully support those goals. Some of the many things that you can accomplish with an asset protection trust include:

• Making sure heirs or beneficiaries don’t squander an inheritance.
• Making sure someone controls your assets in case of incapacity.
• Putting trust assets beyond the reach of creditor claims or judgements.
• Ensuring trust assets do not need to be spent down if you require nursing home care that is covered only by means-tested Medicaid.

These are just a few of many different ways that you can use trust creation to protect the assets you have worked hard to acquire during your life.

Getting Help from A Connecticut Trusts Lawyer

Nirenstein, Horowitz & Associates can provide assistance with the creation of an asset protection trust that accomplishes the goals that matter most to you. To find out more about how trusts are used for asset protection, download our free estate planning worksheet. You can also give us a call at 860-548-1000 or contact us online to speak with a Connecticut trusts lawyer for personalized advice.