A trust is a legal mechanism in which a person can secure property or money on behalf of a third party. Many people set up asset protection trusts to prevent family wealth or property from being lost in the event of bad economic situations. It is relatively easy to set up these vehicles with the help of a wealth advisor or estates attorney.
There are three parties involved with the creation of a trust. The first is the settlor, who is the person or group that wants to set up the structure on behalf of another person. The second party is the beneficiary, who is the individual or group of persons entitled to the property or money. The third party is the trustee, who is the person responsible for managing the property or money on behalf of the beneficiary, usually until the beneficiary comes of age. The trustee looks out for the interests of the beneficiary.
One of the main advantages of these legal structures is that a creditor cannot claim any funds or property that is held in the estate of a beneficiary. This means that if the beneficiary owes debts, then the creditor must find other means of recovering those funds. The funds in the trust are generally always secured from court-ordered sequestration.
Many of these structures are set up to avoid or lessen the effect of high taxes on the beneficiary and to limit interference by the government or the courts. They may be useful in the event of a divorce, since the spouse who is not the beneficiary may not be able to claim the trust assets as part of his or her alimony. They may also be useful in the event of bankruptcy, since a beneficiary who goes bankrupt cannot lose his money or property that is tied up in an estate.
Many of these structures established by a settlor in the United States are considered to be a grantor trust under income tax laws. This means that any income that is generated or accumulated must be reported to the Internal Revenue Service as part of the income tax return of the settlor. These structures, while protecting money and property from possession by a creditor, do not offer any considerable tax advantages otherwise.
There are certain stipulations, however, as to what constitutes a valid trust vehicle. They must be irrevocable, which means that they cannot provide protection beyond what the settlor has the power to revoke. They normally also contain spendthrift clauses, which prevents the beneficiary from losing their interests to a creditor.
Sometimes these structures are set up offshore, which means that they are not administered in the United States. An offshore trust structure is not completely private, however. There are still many reporting requirements and disclosure requirements that are enforced by the Internal Revenue.
Before you set up asset protection trusts, make sure you sit down with a good lawyer and discuss your intentions thoroughly. In your discussions, make sure you outline exactly who the beneficiaries are and what assets, such as property or money, are to covered.
There are three parties involved with the creation of a trust. The first is the settlor, who is the person or group that wants to set up the structure on behalf of another person. The second party is the beneficiary, who is the individual or group of persons entitled to the property or money. The third party is the trustee, who is the person responsible for managing the property or money on behalf of the beneficiary, usually until the beneficiary comes of age. The trustee looks out for the interests of the beneficiary.
One of the main advantages of these legal structures is that a creditor cannot claim any funds or property that is held in the estate of a beneficiary. This means that if the beneficiary owes debts, then the creditor must find other means of recovering those funds. The funds in the trust are generally always secured from court-ordered sequestration.
Many of these structures are set up to avoid or lessen the effect of high taxes on the beneficiary and to limit interference by the government or the courts. They may be useful in the event of a divorce, since the spouse who is not the beneficiary may not be able to claim the trust assets as part of his or her alimony. They may also be useful in the event of bankruptcy, since a beneficiary who goes bankrupt cannot lose his money or property that is tied up in an estate.
Many of these structures established by a settlor in the United States are considered to be a grantor trust under income tax laws. This means that any income that is generated or accumulated must be reported to the Internal Revenue Service as part of the income tax return of the settlor. These structures, while protecting money and property from possession by a creditor, do not offer any considerable tax advantages otherwise.
There are certain stipulations, however, as to what constitutes a valid trust vehicle. They must be irrevocable, which means that they cannot provide protection beyond what the settlor has the power to revoke. They normally also contain spendthrift clauses, which prevents the beneficiary from losing their interests to a creditor.
Sometimes these structures are set up offshore, which means that they are not administered in the United States. An offshore trust structure is not completely private, however. There are still many reporting requirements and disclosure requirements that are enforced by the Internal Revenue.
Before you set up asset protection trusts, make sure you sit down with a good lawyer and discuss your intentions thoroughly. In your discussions, make sure you outline exactly who the beneficiaries are and what assets, such as property or money, are to covered.
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