Domestic Asset Protection Trust
We live in a litigious society. It would not be completely unheard of to suddenly find yourself at the center of a lawsuit. Car accidents, bad business dealings, extensive health bills that exceed the limits of your health insurance coverage, and even professional malpractice claims leave you open to the possibility of owing damages to another party. No one wants to think about his or her hard-earned assets being taken away. Estate planning gives individuals an opportunity to protect their assets in a variety of ways. One way to do this is through a domestic asset protection trust. A domestic asset protection trust is a trust that can protect personal assets.
Domestic asset protection trust are set up to personally protect various assets from creditors or lawsuits. Most states do not allow for a personal asset protection trust be set up. California law does not allow for a personal domestic asset protection trust, but that does not mean a trust can not be set up in one of the 14 states that allow them. The trustee of a domestic asset protection trust must be in the state that allows the trust formation.
Domestic asset protection trusts must be irrevocable and contain a spendthrift clause. Irrevocable means that once the grantor has transferred assets into the trust, they have effectively lost ownership of the trust. The beneficiaries of the trust would have to give the grantor permission to modify, amend, or terminate the trust or its terms. A spendthrift provision is a clause in an irrevocable trust that protects the assets of that trust from creditors. Since the grantor effectively lost the rights to ownership of the trust assets, creditors are not able to attach an interest to the assets in the trust.
Who Needs a Domestic Asset Protection Trust?
Those individuals who have a greater risk of being liable to others are usually good candidates for a domestic asset protection trust. Others who have a high net worth or a large amount of assets are also prone to lawsuits or creditors trying to obtain their assets.
While a domestic asset protection trust is way to protect your assets, the transfer of assets can not be done in a fraudulent way. Courts might find the transfer of assets to be fraudulent if they happened after the commencement of a lawsuit, or after a creditor has tried to obtain your assets. As such, it is important to speak with an estate planning attorney to make sure the set up of your trust is done in accordance with all laws.
The Law Office of Kris Mukherji is here to help you with your estate planning needs. From domestic asset protection trusts, to wills, and other types of trusts, our attorneys can help you determine what the best plan of action is for protecting your assets in a legal way. We know the thought of losing assets can be devastating, and no one wants to get caught up in a legal battle over assets. Contact us today for a consultation.