A trust is a legal mechanism in which a person can secure property or money on behalf of a third party. Many people set up asset protection trusts to prevent family wealth or property from being lost in the event of bad economic situations. It is relatively easy to set up these vehicles with the help of a wealth advisor or estates attorney.
There are three parties involved with the creation of a trust. The first is the settlor, who is the person or group that wants to set up the structure on behalf of another person. The second party is the beneficiary, who is the individual or group of persons entitled to the property or money. The third party is the trustee, who is the person responsible for managing the property or money on behalf of the beneficiary, usually until the beneficiary comes of age. The trustee looks out for the interests of the beneficiary.
One of the main advantages of these legal structures is that a creditor cannot claim any funds or property that is held in the estate of a beneficiary. This means that if the beneficiary owes debts, then the creditor must find other means of recovering those funds. The funds in the trust are generally always secured from court-ordered sequestration.
The ability of a creditor to obtain a judgment against the beneficiary is limited to their interests held in the agreement. Because the interests of the beneficiary are protected, this precludes the creditors from obtaining any property or money that has been set up for the beneficiary, even if the beneficiary has been declared bankrupt or has outstanding debts.
However, there are some exceptions to the spendthrift clause. In cases of self-settled estates, when the settlor is also the beneficiary, the spendthrift clause will not apply. Also, when the debtor is the sole beneficiary as well as the sole trustee, or when support payments are owed to another person, the spendthrift clauses will not apply in these cases.
In 1997, Alaska was the first state in the United States to enact laws for asset protection trusts. This was soon followed in other states such as Delaware, South Dakota and Nevada. These structures normally have to comply with several requirements, such as, they must be irrevocable and they must include spendthrift clauses. In order to be irrevocable, the settlor cannot cancel the benefits without proper legal cause.
Sometimes these structures are set up offshore, which means that they are not administered in the United States. An offshore trust structure is not completely private, however. There are still many reporting requirements and disclosure requirements that are enforced by the Internal Revenue.
Before you set up asset protection trusts, make sure you sit down with a good lawyer and discuss your intentions thoroughly. In your discussions, make sure you outline exactly who the beneficiaries are and what assets, such as property or money, are to covered.
There are three parties involved with the creation of a trust. The first is the settlor, who is the person or group that wants to set up the structure on behalf of another person. The second party is the beneficiary, who is the individual or group of persons entitled to the property or money. The third party is the trustee, who is the person responsible for managing the property or money on behalf of the beneficiary, usually until the beneficiary comes of age. The trustee looks out for the interests of the beneficiary.
One of the main advantages of these legal structures is that a creditor cannot claim any funds or property that is held in the estate of a beneficiary. This means that if the beneficiary owes debts, then the creditor must find other means of recovering those funds. The funds in the trust are generally always secured from court-ordered sequestration.
The ability of a creditor to obtain a judgment against the beneficiary is limited to their interests held in the agreement. Because the interests of the beneficiary are protected, this precludes the creditors from obtaining any property or money that has been set up for the beneficiary, even if the beneficiary has been declared bankrupt or has outstanding debts.
However, there are some exceptions to the spendthrift clause. In cases of self-settled estates, when the settlor is also the beneficiary, the spendthrift clause will not apply. Also, when the debtor is the sole beneficiary as well as the sole trustee, or when support payments are owed to another person, the spendthrift clauses will not apply in these cases.
In 1997, Alaska was the first state in the United States to enact laws for asset protection trusts. This was soon followed in other states such as Delaware, South Dakota and Nevada. These structures normally have to comply with several requirements, such as, they must be irrevocable and they must include spendthrift clauses. In order to be irrevocable, the settlor cannot cancel the benefits without proper legal cause.
Sometimes these structures are set up offshore, which means that they are not administered in the United States. An offshore trust structure is not completely private, however. There are still many reporting requirements and disclosure requirements that are enforced by the Internal Revenue.
Before you set up asset protection trusts, make sure you sit down with a good lawyer and discuss your intentions thoroughly. In your discussions, make sure you outline exactly who the beneficiaries are and what assets, such as property or money, are to covered.
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