Using APTs to Protect Your Assets in the Midst of Uncertainty.
COVID-19 has caused global uncertainty and its effects will surely lead to litigation for various issues. As such, both companies and individuals are looking for ways to legally protect their assets. Devising an Asset Protection Trust (“APT”) has been and will continue to be a popular and effective way to protect your hard-earned assets. The advantages of using APTs is that they shield assets from litigation from future creditors and even provide protection against divorces between spouses. APTs are typically favored as preventive measures for potential future liabilities and if properly constructed can be quite air-tight.
APTs Can Benefit Everyone
APTs are not just for ultra-wealthy individuals. They can benefit anyone who has any assets including property, stocks, real estate. Even if you do not contemplate ever being in a position of liability, APTs can still offer advantages to its beneficiaries from a tax perspective.
Moreover, Trusts, if properly established, can be an effective tool used to protect assets from being wasted quickly by the beneficiary(ies) and can be used to mitigate the effect of inheritance tax upon the death of the owner. The effect on the amount of inheritance tax one would have to pay depends on the state/country one is residing in and in the case of real estate, in which jurisdiction the real estate property is located.
APTs are especially favored by individuals wishing to protect their assets prior to marriage without having to sign and negotiate a prenuptial agreement. In fact, there are some countries, such as Cyprus, in which prenuptial agreements are considered unconstitutional and so their courts won’t enforce such contracts. However, with a properly constructed Trust, courts must abide by the Trust instrument.
Taking the Fear Out of Trusts: Know Your Options
There are several types of trusts available depending on your unique circumstances. Some popular types of trusts include discretionary trusts, fixed trusts, QTIP trusts, irrevocable trusts, and dynasty trusts (which are typically used to transfer assets to future generations). An experienced lawyer should be consulted as everyone’s circumstances are different.
APTs in the US
In the United States, APTs are permissible in states which have legislation allowing for such trusts. For example, a trust can be established in Nevada that will offer 0% state income tax (with certain limitations on property held on trust). Dynasty trusts, which are used to transfer assets to future generations, offer tax-free distributions as well. To establish a US Trust, you do not have to be a US resident or a US citizen. U.S. trusts also offer the beneficiaries and grantor their privacy so that their names are not made public. Establishing a US trust is fairly simple and can be done quickly.
To learn more about how you can effectively use APTs to protect your assets, please contact our experienced international lawyers at firstname.lastname@example.org