You’ve worked hard for your assets. Why not try to protect them? Some people may need to use asset protection strategies because they work in a high-risk profession. Others may want to protect assets for their heirs or they need to do some incapacity planning. In this article, we’re going to touch upon some common asset protection strategies.
Sometimes transferring assets to a business entity protects them from judgments. For example, a limited liability company offers protection because the business owner’s personal property typically cannot be taken to satisfy judgments against the company.
Domestic Asset Protection Trust (DAPT)
This trust protects assets from creditors, while allowing the settlor to maintain some control over the trust assets. Minnesota does not yet allow DAPTs. However, Minnesota residents can establish DAPTs in states where they are allowed or go off shore to other jurisdictions.
Qualified Terminable Interests Property Trust (QTIP)
Often used when spouses have very different estates. The wealthier spouse may set up a QTIP trust to provide for the less-wealthy spouse. However, upon that spouse’s death, the settlor’s children typically inherit the trust assets.
There are a variety of creditor protected irrevocable trust solutions to address heirs who are not financially responsible, or work in professions at high risk for lawsuits. A settlor may establish a discretionary trust. A trustee may pay a beneficiary’s debts instead of providing money directly to the beneficiary. If the beneficiary cannot access his funds, neither can his creditors in most cases.
Irrevocable Life Insurance Trust
Irrevocable life insurance trusts can be an effective asset protection tool is structured appropriately. Tax favored permanent life insurance is placed in a vessel where growth is not subject to immediate income taxes. The funds may be accessible to the settlor/grantor is structured correctly. Gifts are made annually to cover the cost of the life insurance premiums. An independent trustee, who can be removed by the settlor/grantor/you, has the power to loan assets back to the grantor in exchange for a promissory note with interest.
Qualified Retirement Plans
Qualified retirement plans can be an excellent vehicle for holding business operations or investments. With the protection of ERISA federal law, many of these plans can be used to stave off creditors and for income taxes on income generated from the enterprise.
Learn More About Protecting Your Assets
There is simply no way to include every viable asset protection strategy in this article. Also, your circumstances dictate which strategy, if any, would be appropriate.
At Virtus Law, we know how to help clients develop asset protection plans. To schedule an appointment with one of our estate planning attorneys, contact us at 612.888.1000 or send an email to firstname.lastname@example.org. Our main office is in Minneapolis, with other offices located in Maplewood, Cambridge, Edina, Mendota Heights, and Red Wing.