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An offshore trust might be a good option to protect your assets

As you get older and begin to put together an estate plan, one thing you should do is look into an asset protection trust. An asset protection trust helps protect your assets against creditors who make claims against your estate.

These trusts are generally irrevocable, which means that you don't get to change the trust after you make it. When the trust ends, the assets inside can be given back to you or distributed to your beneficiaries, depending on the length of the trust's terms.

Why would you want to consider an asset-protection trust?

The main reason is to protect your estate and assets. For example, let's say that you put $50,000 and a vacation home into the hands of a trustee. The trust's terms are for 20 years, at which time the trust will terminate. At that point either you or a beneficiary will receive the trust's contents.

Now imagine that, five years into the trust's existence, you file for bankruptcy. The creditors want to take your vacation home to liquidate it, but they can't. Why? You don't technically own it.

There are two kinds of asset-protection trusts, foreign and domestic

You can choose to have a domestic or foreign asset-protection trust, but you should know that Florida does not currently allow them. If you travel between states, you may want to open the trust in the state where you reside during other parts of the year. Currently, 17 states allow these trusts including:

  1. Utah
  2. Virginia
  3. Tennessee
  4. Wyoming
  5. West Virginia
  6. South Dakota
  7. Oklahoma
  8. Rhode Island
  9. Ohio
  10. Nevada
  11. New Hampshire
  12. Missouri
  13. Michigan
  14. Mississippi
  15. Hawaii
  16. Alaska
  17. Delaware

Since you can't have a domestic trust in Florida, your other option is to have an offshore trust. A foreign asset-protection trust is called an offshore trust because most accounts are held in other jurisdictions such as the British Virgin Islands or the Cook Islands.

It can be difficult to know what kind of trust to use, and these are examples of only two that are recognized out of many. If you are starting to go through your documents and want to have a strong estate plan, it is worth taking the time to get to know your state laws along with federal laws that could impact your estate, beneficiaries and heirs in the future. Your attorney will help you find ways to minimize taxation and protect your assets as you finalize your plans for the future.

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