The term trust has a positive ring. When it comes to your assets, this is more than an impression. Asset protection trusts go a long way toward shielding a beneficiary’s assets from creditors. Set up correctly, trusts mitigate the impact of taxation, protect assets in divorce and bankruptcy actions and from lawsuits filed by creditors. Establishing an asset protection trust is a good idea should you be concerned about your assets getting attached to a lawsuit settlement or court judgment.
Asset Protection Trusts
An asset protection trust is irrevocable, meaning that any transfer of assets into the trust is permanent. Assets in the trusts are owned and managed by the trustee. By removing assets from your ownership, they become legally protected from creditor lawsuits.
Suit protection example:
Someone falls on your property. Your household insurance does not cover all the medical bills and the injured person sues you for the rest. The injured person can only attach assets you own, not those protected under the asset protection trust.
Types of Asset Protection Trusts – Texas Law
Domestic asset protection trusts can only be established in states that have laws that allow them. Texas does not have a domestic asset protection trust law. However, Texas law provides a good deal of asset protection for certain types of assets. For example, Texas law protects homesteads from forced sale to pay most debts and judgments.
The US government can step in after a person dies to collect on long-term care bills and other money owed. There are several methods to avoid Medicaid recovery, including gifts and a variety of estate planning tools your estate planning attorney can suggest.
Foreign asset protection trusts are essentially offshore trusts you can set up in jurisdictions outside the U.S. Trusts are governed by the laws of the jurisdiction in which it is established. If a creditor wins a lawsuit against you in a U.S. court, that judgment may not be enforceable according to the laws of the jurisdiction where your trust is held.
Texas Legacy Trust
While certain trusts are not permitted in Texas, the state has, among other estate tools, the Texas legacy trust. The trust provides similar asset protections. One thing common to the protections is a prohibition against spendthrifts creating trusts to avoid legitimate creditors. The Texas legacy trust shields assets from past creditors but does not protect you from new current debt or future creditors. Also, it is irrevocable, meaning funds committed to the trust and placed under its protection cannot be removed or changed.
- The maker of the trust can be the beneficiary.
- The document must be in writing and according to Texas Law.
- The trustee can be a family member, including a spouse or child.
- Irrevocability and spendthrift provisions apply.
Protect Your Assets and Contact Our Offices Today!
Texas has its own rules regarding asset protection trusts and other estate planning tools. While trusts are generally appropriate for larger estates, anyone seeking to protect assets would be wise to seek the advice of an estate planning attorney. Let The Voeller Law Firm prepare an estate plan that’s right for you. Call now for a free consultation. The Voeller Law Firm, located at 19311, FM 2252, Suite 103, San Antonio, Texas 78266. (210) 651-3851