An asset protection trust is the asset protection strategy par excelence. A corporation divides corporate and personal creditors. A holding company divides business assets from business creditors. A trust divides the benefits of assets from the ownership of them. The assets placed into a trust have no owner – and thus cannot be seized by your or anybody else’s creditors. Distributions made from the trust cannot be seized either. Do you owe credit card debt? Are you behind on taxes? Is your ex-spouse pursuing you for alimony? It doesn’t matter.
They may only lay claim to your assets, not assets owned by the trust. This would be like a creditor trying to take your house because your neighbor owes them money. It’s not possible. This arrangement provides unparalleled protections. Think of it as enabling you to insure against the previously uninsurable -- bankruptcy, taxes, lawsuits and more.
These structures are referred to as self-settled qualified spendthrift trusts, or Domestic Asset Protection Trusts. They are trusts which you form for your own benefit. They avoid the increased scrutiny and stigma of offshore trusts while retaining the benefits. It doesn’t matter what state you live in and are available to foreigners as well.
What is a trust?
A simple metaphor is that a trust is a box. You may place what you want into the box and put a lid on it. The lid may only then be opened according to instructions you write. It is similar to a corporation in that it is its own legal entity. Unlike a corporation, the trust has beneficiaries instead of owners. The beneficiaries control the assets and live off of them, but they don’t own them. This lack of ownership is what provides protections from creditors. They cannot take what you don’t own.
Why were trusts created?
The concept was formed in Britain in the 1600s. The intent was to separate the benefits of an asset from its ownership. Inheritiance etc….
Who can form a trust?
Anyone. It is as simple as forming a company. Trusts have existed for hundreds of years, but this has not bred familiarity with them. There is an air around them of being complex and expensive. This is partly cultivated by trust attorneys to justify their exorbitant rates. Every state in the USA allows trusts, but few understand how to use them. This include most attorneys. Allow us to help. Establishing trusts is how we got started. We understand the process and will happily walk you through it. It’s shorter and cheaper than you would think. Our rate of $2995 includes everything.
Is an asset protection trust for me?
We have laid out three scenarios where an asset protection trust can protect you from creditors. Much like weather-proofing your house it is best to begin when the skies are clear. To mix metaphors, unlike fire insurance though you may purchase it once your house is on fire.
Scenario 1: You have no foreseeable credit events. Your initial transfers into the trust will face no scrutiny. Once you have surpassed look back periods the assets are secure. No creditor may ever make the argument that a transfer from 7 years ago should be invalidated. Place your home in it and sleep easy the rest of your life.
Scenario 2: You have no existing creditor problems, but an event is foreseeable. You have less leeway for movement, but may still make transfers. These transfers are likely to face increased scrutiny. However, the creditor’s lives will be made more difficult. Rather than a typical collections case they will be facing a trust. Most attorneys are not equipped to argue trust law. Your existing creditor will be charged several thousand dollars merely to retain counsel that is willing to read the trust documents. This is before any potential litigation.
The increased time affords you breathing room. Their increased costs also provides a powerful bargaining chip. It could make the difference between a quick lawsuit and an expensive and drawn out one for them. Your hand is stronger and you are more likely to keep more of what is yours. Why roll over quickly and give them everything if you can make their life hard and keep what’s yours?
An creditor protection trust is now a bullet proof vest. You may get shot and it will hurt, but you will live.
Scenario 3: You are in the middle of a credit event. Your creditor will not settle and there is a good chance you will lose the battle.. You are already at “no” and having nothing to lose by fighting back.
Side Story: In August 1808 Russia lit their capitol Moscow and its food supply on fire. When Napoleon seized the city it was the opposite of a triumph. There was nowhere to seek shelter during the winter and he was forced to turn back. Europe’s greatest fighting force marched 2,000 miles back to Paris and saw its numbers drop from y to x.
Any transfers will face scrutiny and be turned over. What you need is a little bit of time and the threat of raising your creditor’s collection costs.
Step 1: Place your assets into a trust.
Step 2: Use the trust’s funds to purchase an illiquid or expiring asset.
Step 1 increases your creditor’s litigation costs and time. Step 2 makes your remainign
YOUR DOMESTIC ASSET PROTECTION TRUST
GOAL: The goal of asset protection planning is to change a creditor's economic analysis. In order to properly understand asset protection, one must analyze timing, the creditor, and the specific assets under consideration.
Asset protection is not about hiding assets. It doesn't work. They will be found out in a debtor examination. Perjuring oneself is not an option.
The concept of asset protection is that creditors can only go after assets you actually own. The strategy is to remove title out of your name but still allow you to have control and enjoyment. The way we do this is through limited liability companies and trusts. With respect to Wyoming limited liability companies, there is no remedy to attach a membership interest. The only thing a creditor can do is obtain a charging order. The creditor cannot force a distribution. Thus, the creditor cannot get to the asset. This makes settlement much more favorable to you.
GENERALLY: The Wyoming Limited Liability Company (“WYLLC”) and Wyoming qualified spendthrift trust (“WYQST”) are significant additions to the arsenal available under Wyoming law to individuals who desire a fool proof method for sheltering assets from creditors, spouses and the government.
WYLLC: Wyoming was the first state to enact LLC statues in 1977 and has become the most proactive in updating laws to protect and reinforce LLC asset protection, including one of the few states to recognize single member LLCs. Some of the advantages are:
WYQST: The WYQST has become a significant estate-planning tool throughout the U.S. and is the foundation for estate plans for high net worth individuals. It is, therefore, important to understand how they work, their advantages and whether these advantages apply to you.
This is an agreement between, on the first part, two or more individuals (or one person with him or herself) to form a trust and, on the second part, an administrator (trustee) to hold the assets in trust and manage them. The person establishing the WYQST (grantor) cannot be the person acting as trustees; however, Wyoming recognizes the “Private Trust Company,” which allows the grantor to form an entity expressly for the purpose of administering the WYQST, with the grantor acting as manager of the Private Trust Company. In essence, the grantor may do indirectly what cannot be done under the statute directly.
WYQST MUST BE IRREVOCABLE (EXCEPTIONS)
A trust may either be revocable or irrevocable; however, a WYQST may only be irrevocable. This means that the grantor may not amend, restate or revoke it after execution. The following trust powers will not affect the irrevocable nature of the WYQST; thus, the grantor may:
GRANTOR AS INVESTMENT ADVISOR TO WYQST:
The grantor acting as investment advisor, whether acting through a Private Trust Company or not, may direct:
A VARIETY OF ASSETS ARE PROTECTED IN A WYQST, INCLUDING:
COWBOY COCKTAIL: The plan requires that the grantors:
By combining the WYLLC with the WYQST the grantor protects not only the underlying assets in the LLC, the grantor protects the income distributed out of the LLC. Even if a creditor obtains a charging order against the WYLLC the distributions would flow into the WYQST and then out to the grantors as beneficiaries of the Trust.
PROPERTY NOT PROTECTED: The following cannot be protected against:
WYOMING BENEFITS: The following are significant benefits to Wyoming:
CONCLUSION: The Cowboy Cocktail offers a wonderful opportunity for people to move assets out of the reach of creditors and still have access to those assets. Careful planning and implementation are prerequisite to a successful Asset Protection Plan.
Form an asset protection trust for your most valuable assets. Protect yourself from zealous creditors, fortune hunters and bad luck.
Separate assets and liabilities with multiple structures. Necessary for companies in risk prone industries or with significant assets. Includes attorney time and more. Consider it a one-time insurance payment.