You’ve started to amass considerable wealth and you have no idea how to protect it from creditors or potential legal actions where you might be rendered liable. That’s when an asset protection trust (APT) comes into play.

Asset protection is the group of strategies implemented to safeguard a person’s or a corporation’s wealth. It limits potential creditor’s access to valuable properties within the debtor-creditor law.This means that it isolates assets without having to resort to illegal practices.
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An asset protection trust is one of these strategies that both businesses and individuals can use to shield valuable properties from creditors. It allows for debts to be settled on favorable terms for both parties (grantor and beneficiary) without the need to spend time and money in costly litigations.
This strategy’s regulatory requirements are complex. For starters, it is irrevocable. It also includes a spendthrift clause, which is a provision in a trust that limits the ability of the beneficiary to transfer rights to future payments to a third party. It is used to protect the beneficiary both from themselves and from creditors.
In order for any asset protection strategy to be effective, it needs to be set up before any claim is filed. Other methods used for asset protection are family-limited partnerships and accounts receivable financing.
When a debtor doesn’t have many assets, it is very likely that declaring bankruptcy could be a more beneficial strategy. If, however, the amount of assets is considerable, it is advisable to take a more proactive approach.

Additionally, every state in the U.S. has policies to protect corporation owners.

It is important to note that not many U.S. states (domestic APT) allow asset protection trusts. But, this kind of legal recourse can be established in the states that allow it without the beneficiary being a resident. Additionally, offshore territories also allow individuals to set asset protection trusts (foreign APT).There are, of course, some requirements such as that the documents and administration of the trust and some of its assets be in the same jurisdiction where it was established.
There are several different types of asset protection trusts, and you should consult with a law practitioner to determine which one better suits your needs. Some of these include spendthrift trusts, self-settled trusts, support trusts, personal trusts, discretionary trusts, and others.
Regardless of which one you choose to protect your patrimony, make sure everything is done in due time and legally. A court will dismiss transfers of any assets to a protection trust in some cases when a debtor acquired the responsibility of debt without any reasonable expectation of fulfilling them. Also when the claim filed by the creditor was done before the assets were transferred to the trust, or when said transfer was made with the intent of deceiving the creditor.
No asset protection strategy is guaranteed to keep your property free of liability, but if you feel the risk of losing your assets is too high, it may be best to create a business entity or an offshore trust such as the one mentioned above. Any legal decisions you make should always be consulted with business law experts so that you are sure you are within the realms of the law.