Trusts are highly valuable, protective instruments that you can and should use to safeguard your wealth. If you put the right assets in the right trust, for example, you effectively insulate those assets and prevent them from being seized by creditors, lawsuit plaintiffs, or anyone else who might want to take your hard-earned money and property.
However, not every trust can accept every type of asset, and you shouldn’t assume that one trust will be a catchall safety vehicle for your wealth. Let’s take a closer look at what assets cannot be placed in a trust and explore alternative asset protection measures if you need them.
What Assets Can’t Be Placed in a Revocable Trust?
A revocable trust is a fiduciary arrangement that can be altered by the grantor after the fact. For example, you set up a revocable estate planning trust so that your estate doesn’t go through the probate process and your beneficiaries get all of the money and property want them to inherit.
However, since the trust is revocable, you can also make modifications to the trust’s terms and conditions. You can also add beneficiaries, terminate the trust ahead of time, and much more.
Unfortunately, revocable trusts don’t allow you to place several types of assets within them. Specifically, you can’t place the following assets in a revocable trust:
- Retirement assets, such as a 401(k) or IRA/individual retirement account
- Health savings accounts (HSAs) and medical savings accounts(MSAs)
- Assets that you hold in other countries aside from the US – think of a real estate property in Canada, for example
Naturally, this can throw a wrench into your asset protection plans if they hinge around setting up a domestic asset protection trust!
For example, you cannot put a lot of your net worth in a domestic asset protection trust or any revocable trust in the US and assume that that money is safe from a creditor or adverse judgment during a lawsuit.
What Asset Can You Normally Place in a Trust?
There are lots of assets you can place in a standard trust instrument. For example:
- Limited liability companies or LLCs
- Tangible property, such as artwork, sports collectibles, furniture, family heirlooms, and so on
- Cryptocurrencies like Bitcoin and Ethereum
- Insurance policies, like life insurance policies or malpractice insurance policies
- Bank accounts and the money that they hold – this is technically a way to get around the limitation of safeguarding cash. Eligible bank accounts include checking accounts, savings accounts, safe deposit boxes, mutual funds, brokerage accounts, and many more
- Stocks, bonds, and other investments on legal markets
- Real estate properties, including properties that you live in as a resident and properties that you maintain as a landlord or developer
- Certificates of deposit or CDs
So even though some trusts can’t accept some assets, they are still good savings and estate planning vehicles for many high-net-worth people.
What Assets Can’t Be Placed in an Irrevocable Trust?
Things are a bit different with irrevocable trusts. An irrevocable trust is the opposite of a revocable trust: once you sign on the dotted line, you can’t change the trust’s terms, conditions, or list of beneficiaries unless you and those beneficiaries all agree that a modification is needed and a judge agrees to the modification.
For all intents and purposes, an irrevocable is unchangeable. This is an advantage when it comes to asset protection.
If you put the assets you want to safeguard in the right irrevocable trust, a judge can’t order you to give them up or modify the terms of the trust (e.g., a judge can’t compel you to make an emergency distribution of your liquid capital to pay for or damages).
Most irrevocable trusts allow you to place practically any asset you want within them. This includes property, vehicles, liquid capital, and so on. Because of this, Dominion highly recommends using irrevocable trusts for your asset protection strategies.
You’ll be able to shield much more of your wealth with an irrevocable trust compared to a revocable trust.
Trust Laws Differ by Country
That all said, you also have to keep in mind that trust laws differ heavily by country. One country or jurisdiction might allow you to place liquid capital in an irrevocable asset protection trust, for example, while another country may not.
This highlights the importance of working with experts like Dominion. Because there are many different jurisdictions in which you can place and set up an offshore trust, you need to choose the right jurisdiction based on:
- Your overall asset protection strategy
- The kinds of assets you want to place in your trust vehicle
- Who you want to manage the trust
- The tax laws that may affect your trust distributions
- And much more
It doesn't make any sense to try to untangle these complexities by yourself. If you're already a high-net-worth individual, you can afford premium legal and financial advising services, so make things easier on yourself and work with the experts from the get-go.
How to Tell What Assets Can be Entrusted?
In most cases, an attorney will flat-out tell you what assets can and cannot be entrusted in a particular trust vehicle.
For instance, if you try to set up a revocable domestic trust in the US, the attorney you work with will tell you whether certain property can be transferred in or out of that vehicle. You won't ever accidentally transfer property into a trust that legally can't be held with that arrangement.
You can also learn more about what assets can be placed in a trust and what assets can’t be placed in a trust when you work with asset protection specialists. At Dominion, we’ll answer any questions you need to ask and settle any concerns you may have about your asset protection strategy.
Rest assured, if you have an asset you want to protect from litigation or creditor claims, we can help in one way or another.
Can You Protect Your Assets in Other Ways?
Asset protection trusts aren’t the only tools in your repertoire when it comes to safeguarding your estate, property, and cash. In fact, there are plenty of other ways in which you can insulate your assets from claims.
For example, you might set up holding companies or offshore bank accounts in which you can store those assets and simultaneously prevent them from being claimed by the US legal system. Alternatively, you might take advantage of certain tax laws depending on the jurisdiction.
The details vary from case to case, of course, and what will work for you depends heavily on your position and the kinds of threats you want to defend against.
Once more, it’s important to get in contact with specialists right away – there are things about comprehensive asset protection that can’t be broken down so easily in a simple online guide.
Get in Touch with Dominion Today
To recap, most asset protection trusts will accept the vast majority of assets you want to store and protect. Furthermore, when you work with the knowledgeable experts at Dominion, we’ll be able to explain what different trust vehicles in different jurisdictions allow.
Depending on what exactly you need and what your protection strategy calls for, it’s possible that an offshore asset protection trust could receive the lion’s share or all of the assets you want to safeguard.
But you'll only find out if you get started with an asset protection plan right away. Contact us today to speak with one of our representatives and to learn more about what assets can and cannot be placed in a trust.