An asset protection trust is a general term that covers an array of legal structures, ranging from trust for funds to be held on a discretionary basis. The asset fund is aimed at mitigation or avoiding the effects of taxation, bankruptcy, and divorce on your ones loved ones (beneficiaries).
There are different reasons why people set up asset protection. Some people set up asset protection trusts fox tax benefits. Cook Island Trusts are popular with people who like personal security and protection from frivolous lawsuits. Some of the advantages of setting up asset protection trusts include:
Offer Protection for Your Children
Asset protection trust secures your legitimate children and grandchildren in the event of any change in your lifestyle that may affect your estate. For instance, when you get divorced or re-marry, children from the previous marriage may be disinherited from your estate if you had not named them in your asset protection trust. The same situation might happen in the event that your legal children inherit your estate and then later divorce. In such a case, the ex-spouse is entitled to part of the estate, thereby possibly disinheriting your grandchildren.
Protection in Case of Mental Incapacity
Should you become mentally incapacitated, the state may declare you unfit to manage your estate. As a result, the estate could be handed over to the court. But you can prevent this by having a protection trust, with your clear wishes for your asset management and trustees. According to the team from Ora Trust, when you have an asset protection trust, all your money under the protection can be managed by your beneficiaries. In case of mental incapacitation, only those assets not under the protection can be taken over by the court.
Protection From Bankruptcy
Life may sometimes take unexpected turns and unforeseen debts can threaten your thriving estate. An asset protection trust will not prevent you or your beneficiary from being declared bankrupt. However, in case of bankruptcy; your assets are protected from being used as leverage to clear your debts. This means that if your children or grandchildren get financial challenges, your assets will still be intact.
Protection From Probate Costs And Delays
If you don’t want your loved ones to go through the lengthy and costly process of probate upon your death, then you better create an asset protection trust for your investments. When you have an asset protection unit, payout to your beneficiaries when you die will not be delayed. On the same note, if the nominated Trustees prefer that the money is used for specific purpose like caring for disabled family members or grandchildren, your assets will be left in their hands for management.
Protection For Disabled Beneficiaries
On your demise, if you leave your disabled child or any other loved one who was fully reliant on you with some modest inheritance, the benefits might continue until depletion of the inheritance. To ensure their continual well-being, you can set up an asset protection trust for them. An asset protection trust can ensure the financial well-being of your loved ones since any asset within the protection will be disregarded.
Protection Against Future Challenges On Your Estate
Families can be unpredictable. You can never be sure what will happen to your estate when you die. Challenges like spouses from a second marriage or even estranged children coming up to fight for allocation of your estate always prop up. This leads to long legal proceedings that are costly and disheartening for those you wish to benefit from your estate. The solution to all these is to set up an asset protection that will cover all your assets within the trust.
Amassing wealth is no piece of cake. Most people will go through a lot trouble to ensure their loved ones live a comfortable life. Unfortunately if you don’t protect your wealth, unpredictability of life can still leave your family vulnerable. That’s why asset protection is important.