One of most common topics we discuss with our business and estate planning clients is asset protection. The best time to do asset protection is when you do not have any known or potential creditors. Unfortunately, this is often the least likely time to consider protecting your assets.
Today we have some innovative trusts that provide asset protection without the risks, expenses, and IRS compliance associated with Foreign ssset protection trusts or Domestic asset protection trusts (DAPT). A domestic asset protection trust is a trust created under state statute (not in Florida) which purports to protect the assets while still giving you access to the assets when there are no creditors. Unfortunately many states will not recognize the protections when there are assets which are located in another state. For example if you have your Florida property or bank account in a Nevada or other state’s DAPT, it is likely that a court in Florida may not offer you the protections you have expected.
Unlike a DAPT which relies on another state’s laws, our Florida Asset Protection Trust is an IGAP Trust which is based on statutory and common law principles regarding Trusts and Property and can be structured to protect the principal or principle and income of the property being held by the trust. The IGAP trust has no adverse tax consequences like some trusts do because it is taxed just as if you owned the property yourself. In addition some asset protection trusts lose the ability to increase the basis in the assets to the value at your death, but the IGAP Florida asset protection trust does not have this problem and receives the same tax treatment as if you owned the property yourself.
The biggest difference between property in an IGAP Florida asset protection trust and other trusts or property you own individually is that your future creditors cannot reach the principal or principal and income (depending on how the trust is structured). The IGAP trust can also be used to remove assets from the assets which can disqualify you from Nursing home or other forms of government assistance. A DAPT has a 10 year look back period if you became subject to a voluntary or involuntary bankruptcy while assets in the IGAP trust are not subject to the 10 year loop back period.
Often times asset protection trusts work by having you give up control over the assets and appoint someone else to make decisions on your behalf. With the IGAP, you remain in control and make decisions on buying and selling assets as well as if, when, and to whom assets are distributed.
Because there are no annual fees or additional tax returns associated with a IGAP, it is a very cost efficient option for asset protection and estate planning. Many of you may be familiar with a revocable trust as part of an estate plan. If you think of the revocable trust as your savings account, an IGAP Asset Protection Trust would be your savings account.
If you would like talk about how to start protecting your assets along with and estate planning analysis or a complimentary review of your existing estate plan just contact our office and request our estate planning form. Once you complete it, you can schedule a consultation to discuss your circumstances and goals.