Asset Protection 101

Posts Tagged ‘irrevocable trusts’

We explain irrevocable trusts in this section. We already explained that irrevocable trusts as cannot be revoked, unlike revocable trusts. In this section, we further explain irrevocable trusts rules and the protection they offer against lawsuits and creditors. 

Irrevocable trusts explained

To be an irrevocable trust, the trust must comply with the following irrevocable trust rules. 

• The trustee of the irrevocable trust must be independent and cannot be the trustor.

The beneficiary is not the trustor who created the irrevocable trust.

The trustor or person who created the irrevocable trust does not retain the right to revoke, amend, or alter the irrevocable trust in any way.

Income and disbursement records are maintained.

The irrevocable trust’s interests lie with the beneficiaries of the irrevocable trust.

The irrevocable trust is drafted and operated as a business to avoid any fraud or sham.

If the beneficiaries are the children of the trustor, once the beneficiaries are of legal age, the irrevocable trust document may say that the irrevocable trust will terminate. Once the irrevocable trust terminates, all assets in the irrevocable trust can be transferred to a family limited partnership for further asset protection.

A living trust can be used in asset protection. There are many types of trusts. When set up correctly, a living trust can be gem in estate planning as an asset protection strategy. A living trust helps avoid probate. However, living trusts usually do not protect your assets against lawsuits or liens. There are many seminars on living trusts but they rarely discuss what living trusts cannot do for you. A living trust can be a revocable living trust or an irrevocable living trust. There is also a big difference between living trust and will. If you are considering setting up a living trust for asset protection purposes, make sure you understand how living trusts work. You should also look into annuity living trusts and family living trusts.

In general, you need to consult a living trust attorney before you set up a living trust. The living trust attorney will draw up the living trust documents for you. How much the living trust attorney charges for drawing up the living trust documents depends on the state the living trust attorney is in. In California, for example, a living trust attorney in Southern California usually charge a lot more than a Denver living trust attorney. There are living trust forms online for you to set up a living trust yourself if you know what you are doing.

Question: On an irrevocable trust agreement, can a trustee also be a benficiary?

I am looking to fill out an irrevocable trust agreement on a house I own. Can the person I am listing as the trustee of the agreement also be the beneficiary of the property? Or does the trustee and beneficiary have to be two separate people?

Answer: Yes they can be the same. The trustee is the one who carries out your wishes. The beneficiary gets what ever you are giving them. I am trustee and beneficiary on a trust.

The difference between revocable and irrevocable trusts