You have several options for protecting your assets for your loved ones. One of the most effective strategies for preserving your assets is to establish a family trust. When you create a family trust, you put assets in the trust solely for the use of your family members. Your family can include blood relatives as well as relatives through marriage. A family trust can be revocable or irrevocable.
Why Should I Establish a Family Trust?
With a family trust, the grantor no longer owns the assets placed in the trust. However, the grantor can access the assets according to the terms written into the formal trust agreement. You can create a family trust to protect your assets from creditors and legal judgments. For example, you can put your home in a family trust to protect it from the creditors that want payments after a business failure. A family trust also works well if you have specific financial goals you want your beneficiaries to meet. You can set up a family trust, with the assets going to your grandchildren to pay for college tuition.
What is an Irrevocable Trust?
An irrevocable trust cannot be modified in any way after the grantor signs off on the legal agreement. The assets that fund an irrevocable trust become the property of the trust, not the grantor. This means that if the grantor owes money to creditors, the creditors cannot go after the assets in an irrevocable trust because the trust now owns the assets.
It is important to note that each state has enacted statutes that address the formation and management of an irrevocable trust. Consult with one of the estate planning lawyers at Cloud Peak Law Group to learn more about how your state addresses the legal issues that surround an irrevocable trust.
What is a Family Asset Protection Trust?
This type of trust has two main components: Family and asset protection. A family asset protection trust protects your assets from creditors and legal judgments. Creditors cannot gain access to both financial and physical assets. For example, if you place all of your municipal bonds in a family asset protection trust, a creditor cannot liquidate the bonds for cash to pay off a personal or business debt.
One important reminder: Creating a family asset protection trust prevents you from gaining access to the assets in the trust for financial gain. Once you place assets in a family asset protection trust, the assets go to the trust's named beneficiaries.
How Do I Set Up a Family Trust?
The first step for establishing a family trust involves creating a trust agreement document. Your trust agreement document names the beneficiaries and assigns a trustee to manage the trust. In addition to naming the trustee and beneficiaries, the trust agreement document should include the terms of the trust. The terms provide instruction about how the trustee should manage the trust.
Step number two is transferring your assets into the family trust. Every asset, from cash to a property deed, must be put in the name of the trustee. This step is especially crucial because failing to complete it can make a trust agreement document invalid.
The third step is finalizing the trust agreement document. A family trust that you set up incorrectly can cost you a considerable amount of money in administrative fees.
Work with an Estate Planning Lawyer
Working with a state-licensed estate planning attorney can ensure you create a legally valid family trust. Your lawyer will walk you through every step of the process, as well as provide you with advice on which assets to place in the trust. Before you sign the trust agreement document, your attorney will conduct a thorough review of the document.
Schedule a free consultation with an estate planning attorney from Cloud Peak Law Group to create a family trust that protects your assets.