You likely know someone in Utah who lost their wealth or their home due to a lawsuit or creditors. It’s quite devastating and probably makes you think about how you can protect your own assets. Asset Protection Trusts are the best way to protect your assets in Utah and elsewhere.
Not all trusts are the same, and that is also true for Asset Protection Trusts. Here is some information to help you understand more about Asset Protection Trusts in Utah and your options for establishing one:
Asset Protection Trusts Are Irrevocable (and That’s Okay)
Trusts are either revocable or irrevocable. A revocable trust is one where the Settlor (also called a Grantor or Trustor) retains powers to amend or revoke the trust. This is the most common type of trust people create for estate planning (and you should have one).
An irrevocable trust is one where the Settlor does NOT retain powers to revoke or amend the trust. But this doesn’t mean that the trust cannot be modified, it just means some other mechanism is required to add flexibility to the trust. Asset protection is one of many reasons to create an irrevocable trust. When prepared properly, creditors cannot reach into the trust AND you can maintain broad flexibility.
What Is an Asset Protection Trust?
An Asset Protection Trust is an irrevocable trust established for estate planning AND to protect trust assets from personal liabilities and helps influence outcomes in settlement negotiations.
The goal of a properly prepared Asset Protection Trust is to allow the beneficiary access to the assets and funds while keeping creditors out. The most important rule of asset protection is, “If you do not own it, it cannot be taken away from you.” Timing is also crucial. Assets must be transferred to the Asset Protection Trust in advance of creditor problems. If you already have a pending claim, it’s too late.
As the Settlor of the trust, you get to choose the beneficiaries; these can be your spouse, your children, another appointed individual, and in some cases even yourself. Successful asset protection will protect your assets against lawsuits, bankruptcies, IRS audits, and other creditors.
Your situation and assets are unique, and your Asset Protection Trust should be individually tailored to suit your needs. The following two types of Asset Protection Trust fit most needs and both can be specifically tailored to you.
Utah Domestic Asset Protection Trust (UDAPT)
A Utah Domestic Asset Protection Trust (UDAPT) is a self-settled spendthrift trust. Self-settled means that you are the beneficiary of a trust which you created and funded. Generations of laws previously stated that your creditor can get access assets in your trust to the extent that you’re a beneficiary.
Utah is one of a minority of US States that allow creditor protection for a self-settled trust. UDAPTs work well in many situations and have many advantages as well as possible disadvantages. Consult your attorney before deciding on a UDAPT as your choice for asset protection.
Third Party Trust (SPA Trust)
A SPA Trust is a third-party irrevocable trust (non-self-settled) meaning that Settlor establishes the trust and names someone other than themself as the beneficiary (such as spouse and descendants). This type of trust works in all 50 States and under the Federal Bankruptcy Code. A SPA Trust provides the Settlor with enormous flexibility to change the terms of the trust while maintaining maximum asset protection. It is simple to understand, modify, and even unwind.
There are many ways to protect your assets. We work to tailor a unique strategy that suits you and your assets. We specialize in creating customized plans and flexible irrevocable trusts. Protect your assets for you and your future generations by contacting us today.