Asset protection strategies are legal and financial plans developed to shield valuables from lawsuits.  They include analyzing a list of assets that need protection and determining which legal tools or strategy would ideally protect each one.  Examples include forming certain types of trusts and companies and taking advantage of regional laws designed to protect your assets.  These can aid in achieving financial goals, estate planning for the next generation, as well as facing the reality that we are all vulnerable to litigation.  Though pre-planning is best, there are even ways to protect yourself after a lawsuit is filed.

Just a few of the Asset Protection Strategies, utilized by the Hagendorf Law Firm include:

1. Using Business entities and, in particular, LLCs
2. Off-shore Asset Protection Trusts
3. On-shore Asset Protection Trusts
4. Statutory Exemptions
5. Property Agreements
6. Change in Ownership Title
7. Gifting

Trusts can be tricky things for most people to use.

Revocable trusts aka “living trusts” are popular these days.  A living trust is a revocable, amendable trust in which the creator(s) of the trust (grantors or settlors) are also the trustees and the beneficiaries of the trust. A living trust's purpose is to:

1. avoid probate;

2. reduce estate taxes, and

3. distribute the assets upon the death of the creator(s).

Contrary to what you may think

LIVING TRUSTS DO NOT PROVIDE

ASSET PROTECTION

and are not set up

for that purpose.

An ASSET PROTECTION TRUST,

on the other hand, does

provide asset protection and is set up

for that specific purpose.

There is a vast difference between a living trust and an asset protection trust.

First and foremost, the asset protection trust is irrevocable (i.e. the creator of the trust

aka settlor cannot revoke or cancel the trust so that the assets cannot revert back to the settlor upon revocation); living trusts are revocable (i.e. the settlor can revoke or cancel the trust and the assets revert back to the settlor upon revocation).

Second, an asset protection trust is usually nonamendable (i.e. the settlor cannot change the terms or conditions of the trust); the living trust is amendable (i.e. the settlor can change the terms or conditions of the trust).

Third, the asset protection trust has a legal, statutory spendthrift provision in it; living trusts do not.

Last, and most importantly, the creators of the trust, if they are trustees of the asset protection trust, cannot make distributions to themselves. Contrarily, under a living trust, the settlors, as trustees, can make distributions to themselves.

This last difference is why a judge can control the assets in a living trust and why it does not offer asset protection. The judge can order the settlors of the trust either to revoke the trust (so the assets revert back to the settlors) or distribute the trust assets to themselves as the beneficiaries. The settlors, who have the ability to make the distribution, must make the distributions as set forth in the court order or they will be in contempt of court and risk going to jail. After distribution, the creditors can then seize the assets in satisfaction of the debt or obligation

Up until a few years ago, all jurisdictions in the United States prohibited the formation of a self-settled spendthrift trust (i.e. a trust with a spendthrift provision for the creator of the trust aka settlor).  A "spendthrift trust" is a trust which, by its terms, creates a valid restraint on the voluntary and involuntary transfer of the interest of the beneficiary, thereby protecting the assets for the beneficiary.  A "self-settled spendthrift trust" is a spendthrift trust in which the creator of the trust (aka settlor) is both the trustee and the beneficiary.

It is important to remember the basic rule concerning "self-settled spendthrift trusts,"

which is the current rule in almost all states.

The rule states that if a spendthrift trust is set up by the settlor for the settlor's own benefit (i.e. it is a "self-settled spendthrift trust"), then the self-settled spendthrift trust is invalid and the creditor can reach the assets. That is why most cases concerning spendthrift trusts deal with whether the spendthrift trust is self-settled. If it is self-settled, then the creditors can reach the assets. If it is not self-settled, then the assets are safe from the creditors.

Asset protection strategies are legal and financial plans developed to shield valuables from lawsuits.  They include analyzing a list of assets that need protection and determining which legal tools or strategy would ideally protect each one.  Examples include forming certain types of trusts and companies and taking advantage of regional laws designed to protect your assets.  These can aid in achieving financial goals, estate planning for the next generation, as well as facing the reality that we are all vulnerable to litigation.  Though pre-planning is best, there are even ways to protect yourself after a lawsuit is filed.

Just a few of the Asset Protection Strategies, utilized by the Hagendorf Law Firm include:

1. Using Business entities and, in particular, LLCs
2. Off-shore Asset Protection Trusts
3. On-shore Asset Protection Trusts
4. Statutory Exemptions
5. Property Agreements
6. Change in Ownership Title
7. Gifting

Trusts can be tricky things for most people to use.

Revocable trusts aka “living trusts” are popular these days.  A living trust is a revocable, amendable trust in which the creator(s) of the trust (grantors or settlors) are also the trustees and the beneficiaries of the trust. A living trust's purpose is to:

1. avoid probate;

2. reduce estate taxes, and

3. distribute the assets upon the death of the creator(s).

Contrary to what you may think

LIVING TRUSTS DO NOT PROVIDE

ASSET PROTECTION

and are not set up

for that purpose.

An ASSET PROTECTION TRUST,

on the other hand, does

provide asset protection and is set up

for that specific purpose.

There is a vast difference between a living trust and an asset protection trust.

First and foremost, the asset protection trust is irrevocable (i.e. the creator of the trust

aka settlor cannot revoke or cancel the trust so that the assets cannot revert back to the settlor upon revocation); living trusts are revocable (i.e. the settlor can revoke or cancel the trust and the assets revert back to the settlor upon revocation).

Second, an asset protection trust is usually nonamendable (i.e. the settlor cannot change the terms or conditions of the trust); the living trust is amendable (i.e. the settlor can change the terms or conditions of the trust).

Third, the asset protection trust has a legal, statutory spendthrift provision in it; living trusts do not.

Last, and most importantly, the creators of the trust, if they are trustees of the asset protection trust, cannot make distributions to themselves. Contrarily, under a living trust, the settlors, as trustees, can make distributions to themselves.

This last difference is why a judge can control the assets in a living trust and why it does not offer asset protection. The judge can order the settlors of the trust either to revoke the trust (so the assets revert back to the settlors) or distribute the trust assets to themselves as the beneficiaries. The settlors, who have the ability to make the distribution, must make the distributions as set forth in the court order or they will be in contempt of court and risk going to jail. After distribution, the creditors can then seize the assets in satisfaction of the debt or obligation

Up until a few years ago, all jurisdictions in the United States prohibited the formation of a self-settled spendthrift trust (i.e. a trust with a spendthrift provision for the creator of the trust aka settlor).  A "spendthrift trust" is a trust which, by its terms, creates a valid restraint on the voluntary and involuntary transfer of the interest of the beneficiary, thereby protecting the assets for the beneficiary.  A "self-settled spendthrift trust" is a spendthrift trust in which the creator of the trust (aka settlor) is both the trustee and the beneficiary.

It is important to remember the basic rule concerning "self-settled spendthrift trusts,"

which is the current rule in almost all states.

The rule states that if a spendthrift trust is set up by the settlor for the settlor's own benefit (i.e. it is a "self-settled spendthrift trust"), then the self-settled spendthrift trust is invalid and the creditor can reach the assets. That is why most cases concerning spendthrift trusts deal with whether the spendthrift trust is self-settled. If it is self-settled, then the creditors can reach the assets. If it is not self-settled, then the assets are safe from the creditors.