They say that we live in a litigious society, and there certainly are a lot of legal actions initiated. There are some people that are in high risk positions when it comes to potential lawsuits, including certain types of professionals and individuals that own businesses.
Future lawsuits and creditor claims can be a source of concern. It is logical to wonder if you can put assets into a trust to protect yourself, and we will provide some clarity in this post.
Self-Settled Asset Protection Trusts
The perception of the asset protection trust has been changing over the years. There has always been some resistance due to concerns about people improperly using this type of trust to avoid rightful responsibilities to litigants and creditors.
In spite of this reluctance, a significant number of states have legalized asset protection trusts at this point, and the numbers may expand over time. We practice law in the state of New York, and self-settled asset protection trusts are not recognized in our state.
Even though you cannot establish this type of trust in the Empire State, you are not without recourse. It is possible to establish a domestic asset protection trust in another state, and many people go this route.
In all, there are 15 states that recognize self-settled asset protection trusts. The states that allow them that are closest to New York are Rhode Island and Delaware.
It is important to emphasize the fact that this type of trust can provide protection from future legal actions. You cannot convey assets into a domestic asset protection trust when you already know that you are being targeted.
The Protection Is Limited
If you establish and fund a self-settled asset protection trust in another state, the assets would not be protected from every type of creditor.
Spousal support and child support claims could pierce the shield of protection, and tax collectors could go after the resources. Courts would also have the ability to make trust assets available under certain circumstances.
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