The reasons why you must talk to a Ft. Lauderdale asset protection attorney
June 6, 2014 (Newswire) - In the United States, there is an ever present risk of frivolous lawsuits. Consequently, high net worth persons are more often choosing various strategies designed to protect their assets from these types of suits. One common asset protection strategy is to place important assets in an irrevocable trust.
A trust is an artificial entity recognized by law whereby one party places assets within the trust for the benefit of another person. The person who contributes the articles to the trust is specified as a grantor or settlor, while the individual who inherits the assets is called a beneficiary, The type of trust seen most frequently is that where the children are listed as the beneficiaries of their parents role as grantor.
The assets held in the trust are administered by a trustee, who is a third party. The trust property is controlled by the trustee, but they must abide by the rules that are contained in the trust agreement. The trustee will normally be bound by specific state rules concerning their resposibility to the beneficiaries.
A trust can be categorized as either revocable or irrevocable. Revocable trusts can be dissolved by the grantor at any point in time and are generally used an estate planning tool in lieu of a will to avoid probate. Due to the ease of the grantor retrieving the assets, this form of trust won't serve well as an asset protection device.
Conversely, the grantor yields all control of the assets to the trustee in an irrevocable trust, making it a much more suitable asset protection tool. In the event of a lawsuit, the trust property is normally not obtainable. For this type of asset protection to be valid, the grantor should not also fill the position or trustee or sole beneficiary.
Caution is required when making transfers into an irrevocable trust. If a court believes that the assets were transfers in anticipation of fraudulent activity or a lawsuits, the transfers can be classified as a fraudulent conveyance making the trust null and void. Accordingly, one would be well advised to establish any such mechanism as far ahead of any possible legal action as possible.
If creating an irrevocable trust for tax purposes, be very aware of the ramifications. Irrevocable trusts are required to file a federal income tax return, and the rate is typically higher than the individual rate.. Further, any gifts to a trust can be categorized as such and therefore be subject to the estate and/or gift tax laws. There do exist methods of structuring activities that remove the assets from an estate without being subject to taxes, for example, organizing an intentionally defective grantor trust, but this structure will usually not offer asset protection.
For anyone searching for a way to protect their loved one's prospects regardless of any possible health issues or legal issues, irrevocable trusts can be extremely valuable. But before deciding to wade in, consider obtaining the advice of a tax attorney and one who specializes in asset protection. florida asset protection strategies