One of the leading reasons to put together an asset protection plan is to minimize the possibility of lawsuits. However, creating an asset protection trust or using other strategies based on the guidance from your Pasadena estate planning lawyers may not entirely remove lawsuits from the equation.
That said, an asset protection trust could discourage someone thinking about filing a suit from following through, and its existence could also prove helpful in protecting certain assets from being obtained by creditors or predators.
Asset protection trusts may also be referred to as a self-settled spendthrift trust. In that scenario, you, the trust creator, are the settlor of the trust as well as the beneficiary, and you also maintain some level of control over how assets in the trust may be used.
The trust then serves as its own legal entity that can own many things like bank accounts, investment accounts, real estate, cars, collections, personal possessions, and cash/stocks/bonds. When those assets become formally owned by the trust rather than the person, a settlor could still be sued, but those assets cannot be tapped to satisfy claims.
A creditor may perceive that you have substantial assets to be tapped in a lawsuit, but they may be deterred by the knowledge of the trust’s existence since this may deplete a substantial portion of available assets should they win.
It is important to work with an attorney to discuss your goals for asset protection as well to come up with a plan for what you’ll place inside an asset protection trust. Waiting until a lawsuit is filed is too late to do much for protection purposes, so it’s wise to take these steps well in advance of any threat. How you set up the trust is very important for ensuring that assets inside are not accessible in the even that someone does file a suit.
Work with our Pasadena asset protection planning lawyers for more help.