Assets protection1 as the term goes means protecting your assets from creditors and lawsuits. A better explanation of assets protection would be pre-litigation planning to deter lawsuits and protection of your hard earned wealth.
Assets protection is one of the ways you protect your assets and preserve them for your beneficiaries. Assets can include property, cash, shares and almost anything that can be sold for cash. There are three basic categories; family home, business assets and investment assets.
Is Assets Protection Safe?
Yes, assets protection is safe as long as you transfer your assets to a reputable offshore trust. Your assets held in offshore trusts2 are protected with proper laws and held in strict confidentiality. With asset protection you will also have the ability to invest in other business ventures offshore. If you live in a country that is politically or economically unstable trusts are a great way to ensure you do not lose your hard-earned assets.
What A Trustee Is Supposed To Do?
When setting up a trust you are transferring all of your assets into the trustees’ name making them the legal owner of your assets. As a trustee, they are responsible for dealing with the assets based on the terms that are set forth in the trust. Trustees must also follow the legalisation set forth by the country with jurisdiction over the trust.
What Types Of Assets Can Be Placed In A Trust?
One of the best things about a trust is how many different assets3 can be placed in it. Trusts are not made up of just cash or real property. Many times, you will see people placing businesses, shares, or future ownership rights into a trust.
What Are The Costs?
Setting up and handling the trust costs money, how much you end up paying is going to vary based on certain factors. What type of trust you set up and how long you plan to keep the trust in place will affect the cost. You can also incur charges based on the size of the trust and how complicated it is. Complicated trusts often require extra services, such as tax planning, asset management, and record keeping. Other fees often associated with the creation of a trust include annual and termination fees, you can also incur withdrawal fees.
Can I Establish The Trust Without A Will?
Although a trust can be set up without a will in place, it is not advisable. Having a will in place will allow you to appointment a specific person to handle your trust rather than it being handed over to the next of kin. Your trust is in place to protect your assets, but can also help speed up probate.
If you still have questions about assets protection trusts, locations, or anything else contact our office. Our qualified financial advisers will be able to answer all of your questions and help you draft the documents necessary to start protecting your assets today!
Asset Protection Trusts
Asset protection trusts are trusts that are used to protect assets from creditors, excessive taxation, bankruptcy and divorce. These kinds of trusts are typically established in foreign jurisdictions.
The trust’s beneficiaries gain impartial ownership of the interest of the trust’s assets. However, they do not have the legal and direct title to the properties included in the trust. This makes this type of trust an effective tool for asset protection. It allows a person to legally insulate his assets from creditors without concealing or evading taxes.
A trust involves a legal contract between the settler and a trustee to protect the settler’s assets. In asset protection trusts, the assets are transferred to a trustee by the settler for the benefit of a person or group called the beneficiary or beneficiaries. There are several reasons why a person should form a trust but the ultimate purpose is for asset security. It basically creates a protective environment for the assets that will eventually be handed over after a specified period of time to the beneficiary which usually comes in the form of an inheritance. It also safeguards the settler’s assets from unfavourable tax laws of his county of residence.
Furthermore, asset protection trusts offer privacy to the people involved in the account who want to keep their wealth hidden from the public or legal scrutiny. In addition to asset security and confidentiality, a trust ensures that in case of the settler’s demise, his hard-earned wealth will go to the person he chooses and avoid unwanted inheritance claims.
Factors To Consider When Opting For Asset Protection Trusts
Securing your assets through foreign asset protection trusts are a lot more useful and inexpensive than you possibly could imagine. However, potential settlers must cautiously assess different offshore trust4 jurisdictions and make sure that their interests will be given high priority. It is also important that they seek professional advice to ensure optimum benefits. Here are some of the things that one should bear in mind in choosing the right jurisdiction for an offshore trust.
- Make sure that a prospective jurisdiction does not give foreign judgements against the assets that are transferred to a valid or legal trust within its jurisdiction. However, the assets that come from criminal activities such as fraud should be duly exempted. It should also have foreign trust laws that are favourable to your specific needs.
- Political and economic stability is crucial in choosing the right jurisdiction. A country that is politically and economically unstable or underdeveloped can only provide weak asset security. Furthermore, it is often characterized by ineffective financial infrastructures that give you fewer credible banks, lawyers and trustees to choose from.
- It should allow the formation of irrevocable trusts which could give the settler the ability to keep the powers related to the ownership of the asset protection trusts and all of the properties involved therein.
- It is not advisable to invest your assets in non-sovereign nations. This is because they may be under another country’s jurisdiction that may not be beneficial to your interests.
In forming asset protection trusts, the benefits definitely outweigh the costs. This is because nothing could be more important than having complete peace of mind over your assets’ security.
What It Is Not
Many people believe that an asset protection trust is an instrument through which they can hide their wealth or assets. It is important to know what an asset protection trust is all about.
Is Not A Secrecy Scheme
The first thing you need to understand is that an asset protection trust is not a secrecy scheme. It is not meant to hide your wealth. In fact when you transfer your assets to an asset protection trust, you will need to list all your assets for administration. The trust relies heavily on strategic and legal management so as to protect your wealth from lawsuits and illegitimate beneficiaries.
Is Not For Tax Evasion
An asset protection trust is not for tax evasion purposes. It is not a way to avoid your tax responsibilities. However, you will be able to better manage your taxes with asset protection trusts.
Based On Laws
Asset protection trusts are based on proper laws and financial principles. The trust will use legal methods to manage your assets and affairs. It provides avenues through which your wealth can be protected from lawsuits and other detrimental acts by individuals or governments against you.
Asset protection trust is an alternative to expensive insurance and it also acts as a reliable tool for risk management. With an asset protection trust you will be able to transfer the legal ownership of your assets or properties to your children and grandchildren and thereby get substantial savings from your estate tax and income tax.
When Should You Start
When considering asset protection, you should plan in advance. Here are a few things you should consider:
You need to plan ahead and not when a crisis arises. Do not wait till you are stuck in a lawsuit or some other problem before you start transferring your assets to an asset protection trust. If you do this, then it will be considered fraudulent transfer and can be undone by fraudulent transfer law.
Late Planning Is Not Advisable
Asset protection planning should be done before a claim arises. If asset protection is initiated during a claim, both the debtor and the agent who assisted him/her will be liable for creditor’s attorney fees and the debtor could also lose the chances of getting a discharge in bankruptcy.
Not A Substitute For Insurance
Asset protection planning is not a substitute for insurance. Rather it should be considered as a supplement to insurance.5
You can contact us and speak to our financial adviser regarding Asset protection trust and how to proceed with protecting your assets.