Your Assets Are At Risk to Creditors and Liabilities

Have you ever thought about what could happen to your assets if an aggressive creditor came after you or if you came up on the losing end of a frivolous lawsuit? Wealthy people are attacked this way frequently and this article explains a common solution.

Note that many states have creditor-friendly laws that restrict your ability to safeguard you and your beneficiaries from losing what you have accumulated. These laws might also limit protection of assets that you put into trusts if you maintain the right to revoke the trust. For that reason you may have to irrevocably give away your assets in order to shelter them.

There are now, however, two states that can offer you some protection. In 1997, Alaska and Delaware changed their trust laws to allow spendthrift clauses in a self-settled trust. This means that you can name yourself as a beneficiary and protect your assets from creditors and lawsuits.

Alaska and Delaware also did away with the rule against perpetuities. This law presents a dilemma for investors who want to pass their assets along to future generations because it limits the life of a trust to the life span of a beneficiary living at the time you create the trust, plus 21 years. For instance if you name your one-year old granddaughter as a beneficiary, your trust would have to terminate 21 years after she dies. The Alaska and Delaware revisions will allow your asset protection trust to last indefinitely.

You don’t have to live in Alaska or Delaware to take advantage of their asset protection trusts. But you do have to work with a state qualified trustee and put a portion of your trust’s assets with a resident financial institution.

Asset protection trusts are complicated instruments and require a knowledgeable attorney to execute them correctly. But once done, they offer extensive benefits if you are a doctor, lawyer, business owner, or anyone who has large potential liabilities because of your profession or assets to protect. I know of several local law firms that can help you decide if this tool is right for you. If you have assets over $2 million, just return the enclosed coupon to learn more about sheltering your assets from creditors, frivolous lawsuits and liability.