What Is An Asset Protection Trust?

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An asset protection trust is similar to a legal entity, like a company. It can own anything from cash, real estate, stocks and any other investment. With a trust on the other hand, you can be in full control over everything the trust owns, but legally not own anything. So if you get sued, no one can take anything from you.

Let’s take a deeper look at all the aspects of a trust. A trust can in many cases be compared to a legal entity, like a company. Whenever you create either one of them, there is paper worked filed, which spells out how the entity works. The essential difference between a company and a trust, is the way assets are owned, and to what degree the entity can be customized.

For doing business, it makes the most sense to use a company. It’s easy to operate, and doesn’t have too many moving parts. If you are the director you are in control, and if you own shares you have ownership. Pretty straight forward really.

What Is An Asset Protection Trust - Infographic

But for asset protection purposes, the problem with owning shares directly in a company, is that in case of a lawsuit, it’s not always that difficult for those shares to be taken from you. This is when a trust is beneficial, not to operate a business, but to protect ownership.

What’s unique with a trust, is that it doesn’t have shareholders, instead beneficiaries. A beneficiary is not considered to be the owner. Therefore if a trust owns shares in a company, and then someone tries to sue you and take your shares because of being a beneficiary, they will get nothing. Because what you don’t own can’t be taken away from you.

But what is the point of a trust if you legally don’t own it, does that mean you can’t control it either?

When a trust is created, it’s done by someone called the settlor. The settlor of a trust can be you, and it’s possible to give that person certain powers. Meaning that as long as the trust isn’t under any kind of legal attack, you can even have the right to transfer money out of the trust, as the settlor. Meaning you can still be in control, but at the same time legally not own anything. This might sound like a strange concept, but that is how trust laws work. They have existed in some places since the middle ages, and the concept has been used even before that.

So what is an asset protection trust? Now you know.

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Fredrik helps high net worth individuals with creating international asset protection strategies. To keep anything from currency, real estate, precious metals and any other kind of investment protected from an unexpected lawsuit.