What Is an Asset Protection Trust? Are There Different Types of Asset Protection Trusts?
You’ve worked hard to build your personal net worth. You’ve created and followed a well-conceived plan to ensure that you live comfortably for the rest of your life, and that your loved ones will be well-provided in the event of your untimely death. It could all go away in an instant, though. Suppose someone gets hurt on your property, or you’re in a motor vehicle accident and get a significant judgment against you. How can you protect your assets from potential creditors, so that all your efforts won’t be in vain? One of the most effective ways is with an asset protection trust.
What Is an Asset Protection Trust?
A trust is a separate legal entity, created by a trust document. That separate legal entity has the legal right to buy, sell or hold property. An asset protection trust is one that is created for the specific purpose of preventing access by creditors to your assets. Because you no longer own the property in the trust (the trust does), your creditors have not claim on those assets.
As a general rule, an asset protection trust is irrevocable—that means that once you transfer property into the trust, you cannot get it back. The property/assets will generally be managed by a trustee.
Are There Different Types of Asset Protection Trusts?
Yes. Asset protection trusts are generally designated as either domestic asset protection trusts or foreign asset protection trusts. Foreign asset protection trusts are typically set up outside of the United States, protect assets in foreign countries, and are subject to foreign laws. Domestic asset protection trusts are created under state law, though less than half of all states permit individuals to shield assets from creditors through an asset protection trust.
Texas is not one of those states. In Texas, a person cannot create a trust for the protection of assets if the trust is created for his or her own benefit. You can, however, create a trust for the benefit of others and shield assets by placing them in such a trust.
Contact MCIS Law
At MCIS Law, PLLC, in Stafford, we provide comprehensive asset protection and estate planning counsel to individuals in southeast Texas. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.