Should You Consider An Asset Protection Trust?

There are a few unique benefits that an asset protection trust offers, but it also comes with some drawbacks. One purpose of this type of trust is to shield your assets from Arizona creditors while offering you protection from lawsuits.

Revocable Versus Irrevocable Trusts

This trust type is irrevocable. When you transfer assets into this kind of trust, they have to stay there.

This is in direct contrast to a revocable living trust, in which you are afforded the option to put in or take out assets. With a revocable living trust, you give direction to trustees on the management of those assets as a representative of the beneficiaries. It’s a useful setup if you plan on passing assets to loved ones.

With irrevocable trusts, the assets would be owned by the trust under the trustee’s management. The upshot of not owning these assets is that you get protection from creditors as well as any lawsuits that may be filed against you.

Legal action may come for a variety of unforeseeable circumstances. For instance, it can happen if contractors are injured while working on your house for a remodeling job.

Domestic and Foreign Asset Protection Trusts

There are two forms of asset protection trusts, and the one that’s right for you depends on your location and what you want from the trust. If you choose to go with a domestic asset protection trust, make sure they are allowed in the state you’re living. At this time, you’re not allowed to have a self-settled asset protection trust in Arizona.

A foreign asset protection trust functions as an offshore trust. These must be established in a jurisdiction outside of the United States.

An asset protection trust may take some extra time, and its irrevocable nature means there’s no backing out. However, you won’t have to worry about creditors or being sued. It may also provide a way of bypassing probate when your assets are being passed down to your inheritors.