Santa Fe Asset Protection Trust Lawyer

From frivolous lawsuits to increasingly aggressive financial schemes, it seems like it’s harder to hang onto wealth these days than ever before. If you’re worried about the possibility of future claims against your household — or your eventual heirs — then an asset protection trust might be the right solution for you. Talk to a Santa Fe asset protection trust lawyer to learn if this approach or a similar one could work best for your situation.

When properly set up and operated, an asset protection trust can protect against certain types of claims. Anyone creating an asset protection trust (or who intends to benefit from one) should be diligent, however. The trust’s ability to shield assets depends on factors like the way it was formed, how its creator (known as the “settlor”) continues to fund and use it, whether courts can force a trustee to make a transfer, and the nature of the claims against the settlor.

An experienced attorney can work with you to understand your goals, review your options, and set up the ideal arrangements for your unique situation. They can also help you set expectations for how your trust will operate, along with guidelines to increase the chances that it will deliver the expected benefits.

An asset protection trust isn’t the best solution for everyone, but it might be right for you. Reach out to New Mexico Financial & Estate Planning Attorneys to learn more and get started. Schedule a confidential, no-obligation appointment now when you call us at (505) 503-1637 or contact us online today.

Important Factors to Review With a Santa Fe Asset Protection Trust Attorney

A trust’s ability to shield its assets from claims is usually strongest when the settlor has limited access to it. However, with a typical asset protection trust, the goal is often to supply the settlor with occasional income or, at the very least, emergency funds. When the settlor is also a beneficiary, that is referred to as a “self-settled” trust. This is where the law can get tricky.

Only a few states recognize self-settled trusts as a valid, separate entity from the settlor. In other words, the states that don’t recognize these trusts may, basically, treat them as another account in the settlor’s name. By extension, any claims against the settlor in those states can (and must) be paid from any assets available, including trust assets.

When this situation occurs, the settlor has essentially created a very expensive and complicated bank account — one that likely won’t provide the expected asset protection benefits. Further, even if the trust is set up in a state that does recognize self-settled trusts, some claims (especially recent ones) may be able to get around their protections.

Alternatively, the settlor could create an offshore asset protection trust in a foreign country. While these trusts can offer greater protections, they may also create greater risks. There is always a chance that the country’s laws could change or that the settlor could lose their ability to access the trust entirely.

Because of these risks, a Santa Fe asset protection trust attorney will always take the time to first carefully review a client’s goals, their intended use of a trust, and other relevant factors before recommending a trust structure.

Factors an attorney will typically focus on include:

• Whether the client already has a pending lawsuit, judgment, or creditor claim against them (Note: an asset protection trust cannot protect against claims that already exist or are known to be likely to occur)
• What assets the client wishes to shield, and from what types of risks
• Who the client intends to name as their trust beneficiaries (especially if they are one of them)
• The timeframe the client expects the trust to provide the intended benefits
• Which state or country’s laws offer the most favorable legal protections for the client’s intended purpose
• Whether the client also intends to use the trust to minimize their exposure to estate taxes
• How much access to the trust assets the client expects to maintain
• Who the client intends to act as their trustee
• Any possible impending changes to state law, tax law, federal bankruptcy law, or other legal frameworks that could affect the performance of the trust in the foreseeable future
• How the trust factors in with the rest of the client’s estate plan

New Mexico Financial & Estate Planning Attorneys can help you consider these matters from every appropriate angle. After gaining a full understanding of your financial situation and the outcomes you hope to achieve, we can then help you create the ideal trust — or an appropriate alternative.

How Does an Asset Protection Trust Typically Work?

In most ways, asset protection trusts operate just like other trusts:

• Someone (referred to as the settlor, grantor, or trustor) transfers their assets into the trust, which takes ownership of the assets
• The settlor appoints a trustee to manage the assets while following other rules and instructions they set
• Beneficiaries receive transfers (called distributions) from the trust, according to rules set by the settlor

These trusts also typically have a few qualities that equip them to provide the desired asset protection capabilities:

• They are irrevocable, which means that the settlor cannot close the trust or change its terms after it has been created, with very few exceptions
• They are formed in a state that recognizes irrevocable, self-settling trusts as valid, separate legal entities that are not subject to certain claims, judgments, or court orders (often only after a statute of limitations has passed)
• They are managed by a trustee who has discretionary powers, allowing the trustee to decide when to make (or refuse) a transfer to beneficiaries
• They have a spendthrift clause, which forbids beneficiaries from transferring their interests in the trust to another party

Because of these conditions, asset protection trusts should only be used for certain assets and situations. If someone intends to create one and then expects to be able to access funds at any time, for example, then an asset protection trust is likely a poor fit.

If, however, they want to protect assets that they intend to pass on to heirs or to exist as a separate entity for the foreseeable future, then these trust structures might work well for their needs. Talk to a Santa Fe estate planning lawyer to get more information and to understand when these special types of trusts might work well for your particular situation.

Types of Asset Protection Trusts to Consider

There are three main types of asset protection trusts:

• Domestic asset protection trust (DAPT) — Formed in a U.S. state with accommodating legal recognitions and protections
• Offshore asset protection trust (OAPT) — Formed in a foreign country with favorable banking and tax laws, along with protections against foreign judgments
• Medicaid asset protection trust (MAPT) — Can be formed in most states, with the express purpose of removing assets from the settlor’s estate to help them (or a spouse) potentially qualify for Medicaid long-term services and supports without a spend down

Alternatives to an Asset Protection Trust

In lieu of (or in addition to) forming an asset protection trust, some other strategies may be beneficial for protecting assets, including:

• Professional insurance (liability, errors & omissions, etc) and an umbrella policy to cover you against the risks of a lawsuit while working in a high-risk profession
• LLCs, which may be able to own property in a similar manner to an irrevocable trust
• Tenants by the Entirety with Right of Survivorship titles, which forbid a co-owner of the property from being able to transfer their interest
• A prenuptial agreement or Qualified Terminable Interest Property (QTIP) trust, which can protect estates from risks related to divorce agreements or a surviving spouse in a blended family

These options offer varying pros and cons compared to an asset protection trust, especially when considering your unique risks, goals, and financial situation. Discuss your objectives with a Santa Fe trusts lawyer to understand which arrangement might work best for you.

How Can I Maximize the Effectiveness of My Asset Protection Trust?

If you decide to create an asset protection trust, there are a few methods available that can help you mitigate risks while creating the strongest possible defenses against claims:

• Choose your jurisdiction carefully. States like Alaska and Wyoming offer robust protections without state income taxes. A trust formed in Nevada could offer added protections in cases of a divorce, a child support judgment, or a bankruptcy filing. Trusts formed in places like the Cayman Islands or the Cook Islands offer maximum privacy, albeit at an increased cost and complexity. Weigh your options with the help of an attorney to select the optimal route for you.
• Put as much distance between you and the money as you can. In most cases, courts will look at your ability to access the trust and the level of control you have over its operations. The less of both you have, the less likely it is that you could be forced to take a transfer to pay off a claim. While you never want to risk losing access to your assets entirely, you do want to balance how, when, and why this access might be granted.
• Hire a professional trustee, and give them full discretion. The American College of Trust and Estate Counsel (ACTEC) recommends using a corporate trustee rather than someone you know personally. This reduces the risk of allegations that you and your trustee have an implied arrangement regarding discretionary transfers.
• Include the trust in your documentation and estate plan. Because of their intentional distance from you, there is a chance that no one else might know about the trust! While the trustee is obligated to contact beneficiaries to make the expected distributions, the trustee may have trouble reaching them — especially if these beneficiaries didn’t know about the trust beforehand. Accordingly, keep the trust’s location and key information in an accessible location for your estate representative and the trust’s beneficiaries.
• Continue to manage your risks. Courts may be more likely to order a transfer if they feel that you intentionally or recklessly made financial decisions with the knowledge that your assets would be protected. This can be especially true in cases of bankruptcy or egregious spending. Ideally, your trust’s protections will never need to be tested. Accordingly, try to spend within your means and keep your exposure to liability to a minimum.
• Keep professional and personal assets separate. Asset protection trusts are most often needed by individuals who work in industries with a high risk of liability exposure. That means lawyers, healthcare professionals, real estate developers, financial advisors, and those in the construction, engineering, and landscaping industries. To reduce the risk that personal assets could be sought because of a business debt or lawsuit judgment, place business assets into an LLC, corporation, or trust — one that’s well separated from the finances of your own household.
• Avoid taking distributions. ACTEC recommends that you plan to set aside enough financial security to last the rest of your life prior to placing assets in a protective trust.

These precautions won’t guarantee that your trust provides the protections you need when the moment comes, but they can dramatically increase the odds that your assets will be safe. You can review your risk profile periodically with the help of a Santa Fe asset protection trust lawyer to ensure that you continue to follow best practices, while preserving your legacy for future generations.

Discuss Your Options for an Asset Protection Trust With Experienced Santa Fe Attorneys

New Mexico Financial & Estate Planning Attorneys has decades of experience helping clients set up trusts, maintain assets, and plan for an uncertain future ahead. In most cases, our clients’ number one goal is to worry less thanks to the preparations they have made.

From creating a trust to updating your will to making other strategic arrangements, you can rely on our services to feel confident about what life has in store for you and the ones you love. Schedule a no-obligation consultation and estate portfolio review with our team today when you call (505) 503-1637 or contact us online. We’re ready and waiting to help you plan for a brighter tomorrow!