Phoenix Attorneys Craft Asset Protection Trusts

Arizona advocates provide robust legal protection for your hard-earned wealth

If you’ve been successful in accumulating wealth, you have a right to a secure future. However, the assets you’ve acquired may be vulnerable to creditors, liability judgments and excessive taxation. Any of these could undermine your plans to enjoy your retirement and leave a legacy to your heirs. This problem is particularly acute for physicians, attorneys, engineers and other licensed professionals because a corporation or LLC will not protect them from negligence claims. Malpractice liability is personal.

Fortunately, the Law Offices of Donald W. Hudspeth P.C. in Phoenix provides asset protection services to help people protect their hard-earned wealth. A first step may be to use “stealth” companies in which owners are not easily subject to an internet search because their ownership is not publicly listed. Other asset protection devices include family LLCs, custom anti-creditor shareholder or operating agreements and the use of holding companies with subsidiaries. One of the tools we now use more than ever is an asset protection trust, which allows you to enjoy your assets during your lifetime and then seamlessly transfer them to your heirs. An experienced attorney at our firm can explain how asset protection trusts work, and craft a plan specifically for your needs. You’ve worked too hard to let your gains slip away. Let our firm provide the security you deserve.

What is an asset protection trust?

The term “asset protection” can apply to virtually any irrevocable trust, since one of its primary functions is to create a wall of separation between personal property and trust assets, making it harder for creditors and claimants to go after the wealth an individual is trying to secure. A trust is a legal entity a grantor creates to hold assets. The trust then becomes the legal owner of the assets, so anyone with a claim against the grantor cannot attach those assets as they could attach property in the grantor’s name. This wall of separation makes a trust ideal for anyone seeking to protect personal wealth against creditors and court judgments. It is important to note than an asset protection trust serves a different function than an estate planning trust. The estate trust identifies and allocates the assets; the asset protection trust protects them.

Very wealthy individuals were able to place assets in offshore trusts, which added even greater protection, since the trusts were not under the jurisdiction of U.S. courts. However, starting in the 1990s, U.S. states began to enact specific statutes for domestic asset protection trusts, or DAPTs. Today, 16 states have domestic asset protection statutes. Arizona is not one of those states, but an Arizonan might be able to set up a DAPT in a DAPT state if he or she has property there. The other option is to set up an offshore asset protection trust, or OAPT.

Advantages and limitations of an asset protection trust

The key advantage of a domestic asset protection trust is that the state is in effect siding with the debtor by enacting statutes stating that an in-state or foreign state judgment is not enforceable against the trust assets. The DAPT may be combined with and own “sunny day” and “rainy day” LLCs. Also, by careful drafting and timing, a grantor can make himself the beneficiary and receive discretionary distributions from the trust. Those distributions may also be outside the reach of creditors. In some cases, e.g. in Nevada, the DAPT may bar claims for child support. For this reason, a DAPT is a solid strategy for protecting personal wealth in the event of divorce or bankruptcy. Prior to marriage, you can create a DAPT to hold your personal assets so they will not be part of the marital estate, and the court could not divide them with your spouse. You could also place nonexempt assets in a DAPT. If you have to declare bankruptcy, the bankruptcy trustee will not take those assets to satisfy your creditors.

However, there are some important limitations. An asset protection trust is irrevocable, which means that once a grantor creates the trust, he or she cannot undo it. A grantor cannot set up an asset protection trust to defeat the claim of a specific creditor. So, if you already have notice of a claim, including a demand letter or even an email, it probably is too late for asset protection. Once there is notice of a claim, in most cases establishing an asset protection trust would be considered a fraudulent transfer, and the claimant could unwind the transfer to attach the assets. Therefore, it’s important to establish the trust in advance of running up debt, filing bankruptcy, getting divorced, getting into an auto accident or any other event the trust is meant to guard against. Moreover, if you want to set up a DAPT, you should be aware that different states have substantially different laws, so there are varying degrees of protection.

Finally, it’s important to speak to an attorney who puts your interests first. Trusts are very flexible instruments that can be used in combination and crafted to address your specific circumstances. Our attorneys are determined to help you achieve your goals for asset protection in Arizona through the most appropriate means for your circumstances.

Contact an experienced Phoenix business lawyer to discuss asset protection trusts

If you want to protect your hard-earned wealth, Law Offices of Donald W. Hudspeth P.C. can help. Our business attorneys offer a range of asset protection services in Phoenix and throughout Arizona. Call us at 866-696-2033 or contact us online today.