Asset Protection Trusts: How Trusts Affect Your Taxes
Asset protection trusts are irrevocable trusts. These trusts simply protect a person’s assets. When it comes to these trusts, they are different from others because the owner of the trust is also one of the beneficiaries. This means that he or she will continue to benefit from the assets in the trust. In addition, he or she is able to keep the assets out of the hands of creditors. There are a lot of reasons why a person may consider using an asset protection trust. One of these reasons is for tax purposes.
Many people want to protect their assets from any traditional creditors. They may also want to protect the assets against any future liabilities. This is particularly common for financial advisors, lawyers and doctors to think about before establishing a trust. When it comes to these industries, they are at a high risk of experiencing a lawsuit. If you want to protect your assets, then it helps to have an asset protection trust in place.
When establishing an asset protection trust, most people want to know about taxes and if it affects the taxes at all. When you have an asset protection trust, you need to keep in mind that as the creator of the trust, you still have power over the trust. In this case, you are able to access the assets and they still belong to the creator. Due to this, the assets are the same as holding onto funds in your names. It is not a separate taxable entity. You do not avoid taxes on asset protection trusts.
When you have an asset protection trust, your beneficiaries are also protected. If a creditor comes for their assets after your death, the creditors cannot touch it. This is especially helpful for those families who have children who may not be responsible with money. Likewise, it helps for those who may have jobs with high-risks of lawsuits.
When it comes to asset protection, a trust can be a great way to protect assets from creditors and others who may file claims against you. When it comes to taxes, most asset protection trusts do not benefit when it comes to tax purposes. However, it does protect you and your beneficiaries. In addition, it can help your family avoid the costs of probate in the future. When it comes to estate planning, discuss your options with a Memphis estate planning lawyer to narrow down the best possible options.
Thanks to Wiseman Bray, PLLC for their insight into estate planning and asset protection trusts.