How To Use A Domestic Asset Protection Trust Legally
Nowadays more and more lawsuits are filed without any reason and sometimes the people that start these frivolous lawsuits can actually win. Because anyone can get sued, some of the jurisdictions have changed in order to give you an advantage over your claimants and some form of asset protection. An asset protection trust is used to protect someone assets against creditors. Until recently, most asset protection trusts were formed offshore in states that offer benefits: the Isle of Man, Cook Islands and a few other jurisdictions. In the past years domestic asset protection trusts have become available in the United States jurisdictions. You can now form a domestic asset protection trust in Delaware, Nevada, Alaska, Rhode Island, Oklahoma, Utah, and Missouri.
There are many forms of domestic asset protection trusts, but they basically have the same features. Assets must be transferred by the grantor to a trustee through an irrevocable spendthrift trust. The trustee can be an individual or a bank. In some states that allow domestic asset protection trusts, the grantor can keep the power over the distributions of the assets. The trustee must manage the assets properly and he must keep trust records and any other documents that are needed while administrating the trust. Another line of security can be the trust protector. He has the power to replace the trustee and can also decide on anything related to the management of the trust.
If you want a powerful trust, you need to create it right away. After the transfer of assets to a domestic asset protection trust , a period of time must pass in order to make it stronger. If you have just formed a trust and the assets are claimed by your creditors they can prove that you've made the trust with fraudulent intent, in order to trick them. The period of time that makes your domestic asset protection trust secure can vary, but in most of the states it is set up to 4 years. If you have created the trust 4 years before any litigation, your assets are secure and creditors can't reach them. That is why domestic asset protection trusts must be created when you have no litigation problems, while your assets are not in danger.
In most of the states that allow domestic asset protection trusts, two types of creditors are exempt from the provisions of these trusts. Assets can't be protected from child support claims or divorces if the spouse was married to the grantor before the creation of the trust. The only two states that don't have exempt creditors are Nevada and Delaware.
These techniques have been used in the last decades, but their efficiency is not yet proven in U.S. courts. There are no cases that involve transfers to domestic asset protection trusts so their efficiency can't be proven. But more and more people start to enjoy the benefits of this asset protection method and it seams to work for them. The level of security is high and other domestic asset protection techniques are not available. With a good plan you can protect any type of assets and you can be safe from any creditor.
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