Lisa Gray has been a wealth writer since 2001. She has been involved in the wealth management industry since 1988. She is the author of two bestselling books—The New Family Office and Generational Wealth Management.| Trusts Are One Of Several Tools Available For Protecting Assets From Creditors And Investor Lawsuits |
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| Thursday, May 24, 2012 13:27 |
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With an ever increasing litigious society, protecting assets from creditors has become a focal point for wealthy investors. Asset protection trusts are a vehicle of choice for those who do not have access to executive level liability insurance. Although umbrella insurance policies and family LLCs also offer protection, asset protection trusts offer flexibility of access to assets contained within while also protecting against the risk of a lawsuit. This Website Is For Financial Professionals OnlyTrusts are primarily funded with liquid assets. The fact is, anyone who serves on a board of directors for a competitive company can become a target of an investor lawsuit. But not every state offers asset protection trusts. Virginia is the most recent state to sign them into law but that only brings the total for states offering the trusts to 13.
Investors are cautioned not to go overboard in funding the trusts. The primary purpose of the trusts is to keep assets out of reach of creditors or litigators, not to be a primary source of income. It’s advisable not to place more than 50% of a client’s assets in this type of trust. Assets must be retitled to shift ownership to the trust.
There are other tools for shielding assets, such as the federal exemption of 401(k) plans that keeps those assets out of litigators’ reach. Investors should explore all of their options for asset protection and should research what states permit asset protection trusts and other protective strategies different states may offer.
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