Are Family Trusts the Best Asset Preservation Strategies?
- February 24, 2015
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Our estate planning blog reviews the best asset preservation strategy that money can buy, which definitely rests in a properly structured and professionally managed family trust or trust fund. The average American has probably heard limited liability companies (LLCs) and revocable trusts as legal instruments that can be used to shield their assets. Others may have heard about a trick involving giving assets away to children and heirs ahead of the execution of a will. The problem with these strategies is that they all present issues that make weak and unpredictable.
Best Asset Preservation Strategies
To understand what the best asset protection strategy may be for an individual, one must first consider the type of protection sought. In general, assets and property must be protected from lawsuits, bankruptcies, excessive taxation, and long-term care costs. With this in mind, we can see why some strategies are less than ideal for asset protection.
Gifting assets to heirs before shuffling off this mortal coil does not dispense away with clawback provisions in some state, which allow creditors to access these gifts when the court considers that they could have been used to pay off debts in the four or five years prior to the gift. Then there’s the issue of trusting heirs with funds and property that they could lose through less-than-responsible financial behavior in their younger years.
Protecting Your Assets with a Family Trust
The problem with LLCs is that they can be easily construed to be vehicles for hiding cash with ulterior motives. There is nothing illegal about asset protection; unfortunately, there is extensive case law involving LLCs being used for unrighteous motives. For this reason, skilled attorneys can use this case law to build a persuasive argument that suggests an LLC was used as an unethical front for a person to hide assets.
Living Trust and Protecting Your Assets
Living trusts are not adequate for asset preservation insofar as their reversible nature. Since a grantor is understood to be able to revoke the trust during his or her lifetime. For this reason, judges consider property held by living trusts to be ultimately owned by individual grantors.
A trust fund or a family trust can be the best asset preservation strategy money can buy, but only if the legal instrument is structured and managed in a certain way. Take, for example, the UltraTrust®; this is an irrevocable trust that is carefully created and funded with bulletproof asset protection in mind. An UltraTrust® supremely performs in terms of shielding assets from creditors and lawsuits because it effectively does away with the burden of individual ownership while allowing grantors to enjoy and control the assets distributed by a professional trustee, all the while reducing overall taxation and providing excellent estate planning options.
If you need help strategizing a plan specific to you and your family’s needs, email us at firstname.lastname@example.org or call (888) 538-5872 for a free 30 minute consultation.
TELL US what you think about the best asset preservation in the Comments Box below. What is the craziest story you have heard or experienced with regards to getting sued or asset protection? Why?