Why Not to Use an Irrevocable Trust for Asset Protection

Why Not to Use an Irrevocable Trust for Asset Protection


Hi. Lee Phillips here. I want to talk to you about why you wouldn’t
use a or an irrevocable trust for asset protection. Now, you understand that a revocable trust
will not give you asset protection because it’s revocable and I get a judgement against you and I walk into court I say this is a revocable trust, make him revoke it and give
it to me. So, revocable trust, if it has that word, “revocable,” in it, no asset protection. Ah. But, how about an irrevocable trust? Well, an irrevocable trust actually, I’m going to say, does give you asset protection. But what you don’t understand is if you have an irrevocable trust, you have moved the assets into it irrevocably and you can’t get them back. They’re not yours. They’re gone. The law says that you can’t set up an irrevocable trust with your assets and have that trust give you benefit. That would be cheating. If you could set up a trust, move the assets into it, and make it so your creditors couldn’t get them, but you have all the benefit of those assets, that’s just cheating, isn’t it? So the law basically says you can’t do, or you can’t set up, what is called a self-settled trust. A self settled trust. It’s an irrevocable trust that you set up, you move the assets into it, and then you get the benefit out of it. That’s pretty good. Now, if you want to set up an irrevocable
trust for your kids, or somebody else, and move those assets into that trust, as long as it’s a spendthrift trust– that means it has a spendthrift provision in it, and we have a YouTube on spendthrift provisions– then the beneficiaries, the kids, their creditors can’t get to the trust. Your creditors can’t get to the trust because it’s not your property anymore. You don’t get any benefit out of it. It’s gone. Now, there are a couple of exceptions to that. One is what we now call the asset protection trusts, the Legacy trust, it started out in Alaska so sometimes we call it an Alaskan trust, basically a few of the states, there’s about a dozen of them now, have decided that you can set up a trust, self-settled trust, move assets into it, and get benefit out of
it. And that’s not bad. But there are a bunch of provisions. Provided, the assets are in the trust at least,
like, 5 years and then they’ll lock down so your creditors can’t get them. Now, Utah actually has a 60-day provision
if you publish and a bunch of other stuff where you can lock those assets down into the trust. The trust has to be made in that state, usually the trustee has to be at least a resident of the state, if not a banking institution in the state. And we’ve got other stuff, other YouTubes on Legacy or these asset protection trusts. By the way, the courts are starting to attack them; I’m not 100% sure they’re going to survive because the courts are saying “No, no, no,
no. This is really a self-settled trust, isn’t
it?” Alaska did it to get a bunch of stuff, assets, up in Alaska under the banking industry’s management. So they wanted money up there. But generally, that’s still a self-settled
trust, I think. So, when you have an irrevocable trust, you can’t get the benefit of it, but you’ve got to remember, whoever does get the benefit of it, you have given those assets away to them. They’ve actually clocked on their gift tax
issues. That’s another story but when you give it to those beneficiaries, you give it to them. And you do the Crummey letter and do all the rest of this, that, and the other junk so that it qualifies to the annual exclusion. That’s the $15-16,000 or whatever it is this week, it’s gone up. I think I started out below $10,000. Shows you how old I am. At any rate, you’re not really going to use an irrevocable trust for asset protection because you can’t get the benefit out of those assets. If you’re willing to give the assets away, ok. You can protect them from your creditors. But hey, give them to me. They’ll be protected from your creditors too. Forget that irrevocable trust stuff, ok? This is Lee Phillips, hoping.

16 Replies to “Why Not to Use an Irrevocable Trust for Asset Protection”

  1. 😂😂😂 I set up a Pure Common-Law Contract Trust (as opposed to a statutory trust) out of the way of illegitimate and de facto government and their agencies' scrutiny LOLOLOL 🎯😭😂💀

  2. Big brother and his clowns are always lurking. I like to think property is safe in a irrevocable trust. With a pour over will only allowing beneficiary’s to sell in order to buy another piece of property

  3. How about an irrevocable trust with a legal entity such as a charitable organization as the beneficiary where by the grantor is an employee and manager of the organization.

  4. The DOJ filed a suit against my deceased brother's estate, is it
    possible for them to penetrate his trust with a default or other
    wise even though it became irrevocable after his death? Please
    Advise

  5. I have a mentally ill aunt. My grandmother passed away and left 50,000 dollars to her.
    The lawyers burned through her money in a short amount of time. There's fees for multiple transactions of repeat filing of paperwork.
    Large fees with other law offices names on them. It is a complete mess. The billing statements have unidentified fees for large amounts.
    There are multiple complaints in regards to this firm for improper management of accounts, clerical mistakes that have cost clients money.

    Her account has been emptied by the lawyers and their fees. I feel like they created reasons to file paperwork so they could attach fees for payment.

    We cannot afford a lawyer to look into this, so my mentally ill aunt is now left with nothing.

  6. What if you leave a property to your kids and then they invite you to live with them? It's theirs, but I would be a guest. Would that be a self-settled?

  7. What if I want to protect the asset till my retirement only. So, not self settling and protected until retirement, then self settling and not protected by then? To be honest with you, i maybe not even need it in retirement but would like the option for it, because you never know, right?

  8. In my state you can receive income from an irrevocable trust. I would be real careful giving out blanket advice over legal matters like this..

  9. @LegaLees Can I own 100% of a trust and make it a member on all of my LLC(s) so it is not a pass-through entity. Have a holding company own the LLCs so that If I get sued my companies are protected? Would it save me on personal tax?

  10. if i am C suit (non CEO) executive of a company i own, and board decides to setup irrevocable trust for me as beneficiary as part of benefit package, with me abstaining from vote. would this fly? i think that could be an legal option, because company is a person itself

  11. My company is in puerto rico. I own online businesses. Does a APT set up in puerto rico have the same tax benefits as a puerto rico resident?

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