Asset protection trusts are legal vehicles used to protect wealth from falling to a person you do not want to have it. They permit property, money or other forms of wealth to be held for a beneficiary until they reach a certain age and can responsibly use it. If you are interested in setting up asset protection trusts, there is a lot of information you need to consider.
These legal structures are normally governed by the laws of the jurisdiction in which they are set up. However, the settlor may appoint another governing jurisdiction if he or she chooses. It is important to remember that states will usually not recognize the laws of another state that conflicts with its own public policies. In addition, if the estate includes real property, then this will be governed by the laws of the state in which the property is situated.
The purpose of these vehicles is to split the enjoyment of the trust assets from its legal ownership, which originates from the settlor. The beneficiaries continue to have an equitable interest in the estate; however, they cannot hold the legal title until they come of age. The legal effect of this is to insulate the money or property from any claims that may be brought by creditors without concealing its intent or trying to evade taxes.
Many of these structures are set up to avoid or lessen the effect of high taxes on the beneficiary and to limit interference by the government or the courts. They may be useful in the event of a divorce, since the spouse who is not the beneficiary may not be able to claim the trust assets as part of his or her alimony. They may also be useful in the event of bankruptcy, since a beneficiary who goes bankrupt cannot lose his money or property that is tied up in an estate.
Sometimes these structures may be set up offshore, for example, in one of the Caribbean nations who offer certain tax benefits. These offshore trusts do not normally prevent legal action from occurring against an individual in their home country. Any court orders that are made under divorce or creditor advantage laws can still be made against an individual to re-coup funds owed. A judge may order a settlor to repatriate funds from an offshore jurisdiction if he or she determines that the settlor has control of the assets.
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.
There are many rigorous tax reporting requirements in the United States that apply to taxpayers who establish these offshore vehicles. Even though no additional taxes may be imposed, they still require full and complete disclosure of all the assets held and the activities taken by the trustees when filing tax returns.
For anyone who wants to set up asset protection trusts, they should first seek the advice of an estates attorney who has a lot of experience in the industry. It is important to make sure that all legal deeds are executed properly and that all assets to be covered are clearly indentified.
These legal structures are normally governed by the laws of the jurisdiction in which they are set up. However, the settlor may appoint another governing jurisdiction if he or she chooses. It is important to remember that states will usually not recognize the laws of another state that conflicts with its own public policies. In addition, if the estate includes real property, then this will be governed by the laws of the state in which the property is situated.
The purpose of these vehicles is to split the enjoyment of the trust assets from its legal ownership, which originates from the settlor. The beneficiaries continue to have an equitable interest in the estate; however, they cannot hold the legal title until they come of age. The legal effect of this is to insulate the money or property from any claims that may be brought by creditors without concealing its intent or trying to evade taxes.
Many of these structures are set up to avoid or lessen the effect of high taxes on the beneficiary and to limit interference by the government or the courts. They may be useful in the event of a divorce, since the spouse who is not the beneficiary may not be able to claim the trust assets as part of his or her alimony. They may also be useful in the event of bankruptcy, since a beneficiary who goes bankrupt cannot lose his money or property that is tied up in an estate.
Sometimes these structures may be set up offshore, for example, in one of the Caribbean nations who offer certain tax benefits. These offshore trusts do not normally prevent legal action from occurring against an individual in their home country. Any court orders that are made under divorce or creditor advantage laws can still be made against an individual to re-coup funds owed. A judge may order a settlor to repatriate funds from an offshore jurisdiction if he or she determines that the settlor has control of the assets.
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.
There are many rigorous tax reporting requirements in the United States that apply to taxpayers who establish these offshore vehicles. Even though no additional taxes may be imposed, they still require full and complete disclosure of all the assets held and the activities taken by the trustees when filing tax returns.
For anyone who wants to set up asset protection trusts, they should first seek the advice of an estates attorney who has a lot of experience in the industry. It is important to make sure that all legal deeds are executed properly and that all assets to be covered are clearly indentified.
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