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What's an Asset Protection Trust?
Grantor or Non-Grantor Trust,
Irrevocable Trust or Revocable
What's an asset protection trust? What's a Trust?
The Trust Contract requires the transfer of assets from the original owner (Grantor) to a legal entity for the purpose for which the Trust Contract was created.
What type of trust, Grantor, or Non Grantor? What's the distinction? A Grantor Trust take a special place within the tax code. A "Grantor-Type Trust" for tax purposes is treated as a disregarded legal entity. The disregarded entity is "Income Tax Neutral" meaning that the original Grantor retained strings attached so that for purposes of the IRS he retains the assets in his complete control, thus he did nothing for the purpose of asset protection. Income tax benefits and income tax expenses are retained by the Grantor, thus he pays income taxes on the income of the trust. The Trust is a "pass-through" to his form 1040 i.e. real estate tax deduction and mortgage interest deduction on his person income tax return.
Revocable, irrevocable trust, what's that mean? Revocable is when the original person with the assets transfers (repositions) the assets to a trust with strings attached. The Grantor, the Trustee, and the beneficiary are the same person. Effectively you have kissed yourself on the hand and blessed yourself as the Pope. A revocable trust does absolutely nothing for asset protection. Many lawyers recommend revocable trusts for avoiding probate, recognizing that the trust is not worth the paper it's written on for protecting assets against frivolous lawsuits and the avoidance of estate taxes.
An irrevocable trust is when the Grantor (the person with the assets) gives-up complete control to an independent Trustee who in turn will use his judgment as Trustee to manage the assets for the beneficiaries of the trust. The fiduciary relationship of the Trustee is to the protection of the assets at any cost. The Trustee must protect and must diligently invest under the prudent man rules, he cannot ever deal for himself. The courts do not look favorably on dereliction of duties while serving as Trustee. An irrevocable trust is the only significant asset protection device for avoiding frivolous lawsuits, avoiding the probate process, avoiding estate taxes, and is the only device for avoiding the mandatory spend-down provisions for qualifying into a nursing home.
An irrevocable asset protection trust when combined with a Limited Liability Company is an asset protection fortress, short of a foreign asset protection trust. A foreign asset protection trust is the Rolls Royce of asset protection, the irrevocable trust with an LLC is the Cadillac.
About the Ultra Trust®:
- Part 1 - Estate Street Partners
- Part 2 - What is the Ultra Trust®?
- Part 3 - What is a Trust?
- Part 4 - Asset Protection Plan
- Part 5 - Asset Protection Eligible Assets
- Part 7 - What is Probate?
- Part 8 - What is Estate Tax?
- Part 9 - Medicaid Spend Down Rules
- Part 10 - What is the Ultra Trust®?
- Part 11 - Irrevocable Trust Benefits
Read more articles on irrevocable trust asset protection:
To learn more about irrevocable trusts and senior elder care visit:
Learn more about irrevocable trusts and asset protection:
- Hide My Assets
- Hide My Assets Medicare
- How the Rich Hide Their Assets
- Offshore Asset Protection
- Estate Planning and Trust
Managing Director, Estate Street Partners, LLC
Mr. Beatrice is an asset protection, award-winning trust and estate planning expert.
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Estate Street Partners, LLC
Uncompromising, Alternative and Exclusive Estate Planning & Wealth Management for an Accelerated Chartered Roadmap to Financial Success
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