continued Despite their advantages, domestic asset protection trusts are not right for everyone. Domestic asset protection trusts are irrevocable, which means they cannot be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets into the trust, effectively removes all of his or her rights of ownership to the assets and the trust. The domestic asset protection trust must be administered by a trustee in the state whose laws authorize such trusts, a disadvantage for individuals who might prefer to work with a trustee available for face-to-face meetings. More important, the trustee — not the person creating the trust — will have sole discretion to make distributions. The trustor cannot “control” the trust property or distributions and must be willing to accept the judgment of the trustee who, on trust creation, becomes the owner of the trust property. Finally, an asset protection trust protects only against future creditors and may not protect against existing creditors or those whose claims arise within a designated period of time after creation of the trust.
To learn more about the benefits and requirements of establishing a domestic asset protection trust, meet with a wealth management professional to help you get started should you determine a domestic asset protection trust is right for you.
About the author: Fran O’Rourke is a senior vice president and manages the Key Private Bank team in the Capital Region. She may be reached at either 518-257-8733 or firstname.lastname@example.org.
The case for Delaware trusts
The Delaware trust is a domestic asset protection trust. It is an irrevocable, self-settled spendthrift trust designed to provide the grantor with protection from the claims of creditors. The state of Delaware has long been known as the “corporate capital” of the United States with more than half of Fortune 500 companies incorporated there. Less known, but equally important, is Delaware’s national renown for its trust and tax law advantages, which provide individuals and families with the highest level of financial privacy, wealth protection and tax avoidance as allowable in the United States.