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An Asset Protection Trust, often structured as an irrevocable trust, is a legal entity separate from you, much like a business. Once assets are transferred into the trust, they are no longer owned by you personally. Instead, the trust holds and manages those assets according to specific terms and purposes.
Because the trust is a separate entity, it can offer protection against certain creditors, lawsuits, and long-term care expenses. These trusts are commonly used in planning for Medicaid eligibility, preserving family wealth, protecting vacation homes, and safeguarding life insurance benefits for future generations.
Unlike a revocable trust, an asset protection trust cannot be freely changed once established. This loss of direct control is intentional and is what allows the trust to provide meaningful protection. Properly structured, assets placed in the trust may be removed from your taxable estate and shielded from risks that could otherwise erode a lifetime of savings.
There are many types of irrevocable trusts, each designed for specific goals. The effectiveness of an asset protection strategy depends on timing, structure, and careful coordination with your broader estate and long-term care planning.
Does an asset protection trust protect assets from all creditors?
No trust offers absolute protection in every situation. However, when properly designed and funded, these trusts can significantly reduce exposure to many common risks.
Can I still benefit from assets placed in the trust?
In most cases, you cannot directly access principal once assets are transferred. However, the trust may be structured to provide indirect benefits depending on your goals and circumstances.
When should an asset protection trust be created?
Timing is critical. These trusts are most effective when established well before a claim, lawsuit, or long-term care need arises.
