When looking into estate planning there are some who are hoping to get a creditor protection trust. Unfortunately, some do not realize all that is entailed in setting up one successfully. In this article, we will go over how to set up a creditor protection trust properly so you can protect your assets.
How a Creditor Protection Trust Works
A successful creditor protection trust should be an irrevocable trust. An irrevocable trust is a type of irrevocable trust that cannot be changed once it is set up. Also, you give all control of any assets you place into the trust. You must name a third-party individual or company, known as a trustee, to take control of the trust assets. Due to the fact that you have no control over the assets in the trust, a court can consider it not to be yours. This means that those assets may not be counted if a creditor’s judgment is filed against you.
Types of Creditor Protection Trusts
There are two types of creditor protection trusts. The first is a domestic asset protection trust. This is a creditor protection trust that is set up within the United States. To be successful the trust must be set up in a state that allows for the creation of these types of trusts. It is important to note that there typically is a limitation period during which any trust assets can still be claimed by creditors. If you are in need of such protection, it is vital you set up your trust in a timely manner.
The second type of creditor protection trust is a foreign asset protection trust. These trusts are formed outside of the United States. Due to strict trust laws in other countries, these trusts generally provide more protection. But they are very complex and expensive to set up and maintain.
Setting Up a Creditor Protection Trust
Setting up a creditor protection trust does require a certain level of expertise. Before setting up one for yourself, make sure you fully understand the ramifications and have it set up properly.
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