What Is Asset Protection?
There are literally hundreds of different techniques to protect different categories of assets. Some are appropriate for everybody and are based on common sense and others are not only appropriate for the wealthy like offshore trusts. However, normal legal trusts are more be highly effective for normal everyday people who just want to protect their hard earned wealth and property. Asset protection techniques also vary depending on both the type and location of property.
All asset protection techniques have one thing in common: they each make it more difficult for a creditor to either find or take assets. By implementing a properly crafted asset protection plan (which may include setting up various trusts) an individual can legitimately put a significant portion of his assets out of the reach of judgement creditors and still retain substantial control over these protected assets. A properly implemented asset protection strategy reduces the size of the target the plaintiff’s attorney is shooting for. Once the plaintiff’s attorney is convinced that any judgment will be difficult or impossible to collect his motivation fades because he is unlikely to be paid for his work. The effect of asset protection planning is the destruction of the economic incentive to litigate.
How Can a Trust Help With Asset Protection?
A properly drafted trust can be utilized to insulate assets from creditors attack, bankruptcy or divorce. This can be achieved number of different trusts including an offshore trust in a different country and jurisdiction, although the assets will more often than not remain in the United Kingdom under the indirect control of the person establishing the trust (the “settlor”). These trusts are normally structured so that they are irrevocable for a term of years and so that the settlor is not a current beneficiary. With a properly drafted and timely settled trust, the creditors of the settlor cannot reach the assets of the trust. These types of trusts are also normally structured so that the undistributed assets of the trust are returned to the settlor upon termination of the trust provided there is no current risk of creditor attack, thus permitting the settlor to regain complete control over the formerly protected assets.
Properly Drafted Trusts Can Be:
- An effective tool to settle or discourage litigation
- A means to keep the ownership of assets absolutely confidential
- An alternative to traditional pre-nuptial agreements
- A hedge against potential exchange controls
- A device to protect otherwise unprotectable pension assets
- A means to give an insolvent debtor a fresh start
- The preferred technique to avoid forced Inheritance and succession laws (common in Europe)
- A way to internationalize investment and hedge against governmental instability