Asset Protection Trust

What's an asset protection trust? In first, the concept of "Trust" should be explained. A trust is nothing more than a contract between the Grantor and the Trustee. The Grantor is the person who wants to protect his assets, while the Trustee is the one who manages them for the Grantor or his family.

The asset protection trust requires transfers of assets from the original owner to a new entity for the purpose of which the contract was created. For the grantor trust, the tax code is pretty specific, and it is being treated as disregarded legal entity. One of the possible disregarded entities might be "Income Tax Neutral", which means that the grantor retained strings attached so that his assets remain in his total control. And he doesn't have to do anything for the purpose of asset protection trust.

An asset protection trust can be chosen between revocable and irrevocable trusts. The difference between them overcomes when the grantor transfers the assets to a trust with a string attached. It is recommended because the possibility of avoiding probates and the recognizing that the trust it's written for protecting the assets. In opposition, in the case of an irrevocable asset protection trust, the grantor gives-up complete control to an independent trustee who in turn, will assure the grantor that he will manage the assets for the beneficiaries of the trust. An irrevocable asset protection trust is the only significant protection device against estate taxes, frivolous lawsuits and the mandatory spend-down provisions for qualifying into a nursing home.

When a grantor combines an irrevocable asset protection trust with a Limited Liability Company, the result is a fortress in the protection systems. For example a foreign asset protection trust is the Rolls Royce asset, while the irrevocable trust with an LLC is the Cadillac.

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