Asset Protection

IF YOU’RE WORRIED about lawsuits, an asset protection trust could put your wealth beyond the reach of your creditors. For a trust to provide this sort of protection, it has to be irrevocable and needs to have spendthrift provisions. In other words, you can’t reclaim the money put into the trust and you can’t control how much the trust distributes each year. Instead, distributions would be at the discretion of an independent trustee, who might cease all distributions if you’re the subject of a lawsuit.

An asset protection trust isn’t necessarily a bulletproof defense against a legal judgment. But it’s enough of a deterrent that plaintiffs may decide it isn’t worth pursuing their case or they may settle for a modest sum. An overseas asset protection trust will likely be less vulnerable to legal challenges, but these are more expensive to set up and administer than domestic asset protection trusts.

Indeed, before you rush to set up an asset protection trust, carefully consider the costs involved. The initial and ongoing fees are likely to be substantial, including costs for legal work, administration and money management. Moreover, you are giving up control over your assets—not a step you want to take lightly.

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