Free BOI/CTA filing for all clients. Receive your LLC, EIN, and bank account SAME-DAY. Learn more.

By The Wyoming LLC Attorney Team

May 28, 2022
Home
  1. What Kind Of Trusts Protect Your Assets?

What Kind Of Trusts Protect Your Assets?

Asset Protection Trust

Summary

Asset Protection Trusts are a vital tool for asset management and protection. Learn about Revocable vs. Irrevocable Trusts, including Bypass and Totten Trusts, offering tailored solutions for your financial security. Consult estate planning attorneys for personalized advice.

Trust is a helpful tool that is set up by more than just the uber-wealthy. Trusts help people manage their assets regardless of income. Even if you have not established a legally defined Trust, you probably have listed a spouse or child as a bank account beneficiary.

The same principle for listing a spouse or child as a beneficiary on a bank account applies to forming a legally binding Trust. You have to decide which of the types of Trust does the best job of protecting your assets.

What Is a Trust?

A Trust is a financial tool that allows you to protect your assets while determining which of the assets and the income they generate go to which beneficiaries. As the grantor of the Trust, you create the terms and conditions of the Trust. A trustee, who can be you or someone else, manages the Trust by following the terms and conditions established by the grantor. As the third component of a Trust, the beneficiaries receive the assets placed in the Trust according to the terms and conditions written into the Trust.

You have two broad types of Trusts: Revocable and Irrevocable. A Revocable Trust allows you to change the terms and conditions after you form the Trust. On the other hand, an Irrevocable Trust prohibits you from changing the terms and conditions of the Trust.

Let’s discover what kinds of Trust protect your assets.

Asset Protection Trust

As the name implies an Asset Protection Trust protects your assets from creditors and legal judgments. As a type of Irrevocable Trust, an Asset Protection Trust allows you to place a wide variety of assets into the Trust. You can transfer cash, stocks, bonds, and real estate. If you own a business, you have the right to place business assets into an Asset Protection Trust. This is an especially valuable benefit of an Asset Protection Trust because, if your business experiences financial difficulties, you can shield the business assets from creditors and legal judgments.

Not every state permits the formation of an Asset Protection Trust. Consult with one of the estate planning attorneys at Wyoming LLC Attorney to discover which state is the best to set up this type of asset-shielding financial tool.

Bypass Trust

Developed to help married couples, a Bypass Trust limits or eliminates the amount of money paid for estate taxes. Each spouse completes a set of estate planning documents to ensure the number of assets declared falls under the maximum estate tax exclusion established by the United States Congress. After declaring assets, each spouse then leaves the remaining assets to the other spouse. Assets left for the other spouse qualify for a marital deduction when determining estate taxes. A Bypass Trust allows a surviving spouse to receive assets tax-free when the other spouse dies.

Totten Trust

The bank account beneficiary example we mentioned above provides you with insight into what defines a Totten Trust. Typically developed to avoid the time-consuming probate process, a Totten Trust works well for assets such as bank accounts and a securities portfolio. However, this type of Trust does not work for personal property like a car or house. To protect real property, you need to set up a specialized Trust.

Creating a Totten Trust requires just the completion of the paperwork that names beneficiaries.

The Bottom Line

Understanding the various Trusts that protect your assets is vital for effective financial planning. Asset Protection Trusts, including revocable and irrevocable options, offer safeguards against creditors and legal judgments. Bypass Trusts assist married couples in minimizing estate taxes, while Totten Trusts streamline asset distribution, particularly for bank accounts and securities.

Making informed decisions plays an important role in safeguarding your financial future. Your specific needs and circumstances determine the choice of Trust that best suits your situation. Consulting with an experienced estate planning attorney provides valuable guidance on selecting the Trusts that align with your unique financial status.