The more wealth and other assets you accumulate, the smarter it becomes to store those assets somewhere other than your bank account or in your name. In fact, it might be particularly wise and far-sighted to have a trustworthy third party hold your valuable assets on your behalf.
Enter trusts. The right trust can provide numerous benefits to high-net-worth individuals like yourself, including entrepreneurs, surgeons, and more.
Trusts might seem abstract and a bit complicated, but with the right overview, you’ll know exactly why it’s a good idea to create a trust with knowledgeable attorneys ASAP.
Trusts in a Nutshell
At its simplest, a trust is a fiduciary arrangement that lets some third party – called the trustee – hold assets on behalf of one or more beneficiaries, taking legal ownership of those assets. The trustee can be a person or a company, though it’s normally the latter.
For example, say that you purchased a prime piece of land and want to pass it down to your children or grandchildren. To prevent the land from being mismanaged, such as being sold by an irresponsible family member, you place ownership deed of the land in a trust.
The trust is then managed by a knowledgeable, experienced administrator called the trustee. According to the documents of the trust, the trustee will give ownership of the land to your named beneficiaries when they come of age (or upon reaching some other benchmark).
By placing ownership of some assets in the hands of a third party, you can avoid any number of legal or personal troubles.
Trust Structure Explained
All trusts have the same basic structure as follows:
- The grantor or settlor is the individual who decides to create the trust. They determine the terms of the trust, such as who the trustee is, who the beneficiaries are, etc.
- The trustee is the appointed individual or company intended to oversee and manage the trust. They are also the one responsible for distributing assets or dividends to beneficiaries, if applicable
- The beneficiary or beneficiaries are the individuals who receive something from the trust, whether that’s money, property, or other assets
Depending on the nature and goal of your trust, you can set it up such that:
- It can be changed or not
- Beneficiaries can only benefit from the trust under certain circumstances
- The trust might have a trust protector, who operates as a sort of higher-level authority for the trustee (and who has the power to change the trustee if needed – note that a trust protector is oftentimes a bad choice for overall trust security)
The Core Purposes of Trusts
Individuals, especially high-net-worth individuals, set up trusts for a wide variety of purposes.
The most common use of a trust is for estate management. A person may set up a trust for the management of their assets while they are alive and especially after they pass away, leveraging the trust and its administrator as a means to ensure that beneficiaries and descendants get what they deserve or what the grantor intends.
However, trusts can also be used to:
- Invest money and give that money to charitable organizations like nonprofits
- Store assets safely to protect them from legal attacks or creditors
- Pass down money or assets to descendants while minimizing or avoiding estate taxes
- Store assets in a credit shelter
- Store and distribute assets for special needs family members or other individuals
- And more
Trusts are incredibly flexible and varied. If you have a goal for your money or estate as a high-net-worth individual, odds are there's at least one trust that can help you accomplish those goals.
Types of Trusts
There is no one-size-fits-all trust for every purpose. Instead, trusts are drawn up according to their goals and limitations. Here are some of the most common types of trusts you might encounter or wish to create yourself.
Revocable vs. Irrevocable Trusts
A trust can be revocable or irrevocable. A revocable irrevocable is one that you can modify or change if your goals shift, if you dislike the job the trustee is doing, or for some other purpose.
An irrevocable trust is the opposite. You can’t change it under any circumstances once the trust is set in stone. There are some limited times when an irrevocable trust could be modified, like under a court order or if all the beneficiaries agree to a proposed modification.
Still, an irrevocable trust is – for all intents and purposes – unchangeable, which makes it particularly effective for certain types of asset protection and estate management (e.g., your beneficiaries can’t easily make changes to an irrevocable estate management trust to get their distributions ahead of schedule).
Living trusts are simply trusts that you set up while you are still alive and with the intention of benefiting from the trust during your lifetime. For instance, a standard trust in which you place your estate and dividend-producing stocks could count as a living trust so long as you are one of the named beneficiaries.
Living trusts are popular among high-net-worth individuals and anyone who wishes to simultaneously protect their wealth and benefit from it without completely losing the fruit of their labor. Living trusts can be revocable or irrevocable, depending on your needs.
Asset Protection Trusts
Asset protection trusts are possibly the most important trust types for high-net-worth individuals, like business owners and doctors.
As their name suggests, asset protection trusts are intended to store and safely manage assets away from the legal reach of one's home jurisdiction (country).
For example, imagine that you are a doctor, and you want to protect the majority of your wealth and estate from unfair lawsuits. You create the lawsuit in an offshore jurisdiction, like Switzerland.
If you are ever sued and lose, a court or the plaintiff can’t come to you and demand the assets in your asset protection trust. That’s because you don’t legally own those assets! Instead, the third party you appointed as the trustee owns the assets, and they may not be beholden to the same laws as you.
Asset protection trusts are clever and effective ways to get around legal claims to your wealth. If you set them up with the assistance of a knowledgeable firm like Dominion, you’ll also benefit from:
- Rock-solid protection. We set up asset protection trusts in the most ironclad, defensible jurisdictions based on your home jurisdiction and needs
- Banking security and privacy. We choose banks based on their appropriateness for asset protection and their security against legal interdiction
- Wealth generation. We also set up asset protection trusts such that the assets within can continue to generate income or wealth for you and your beneficiaries as the years go on
Of course, your asset protection trust will only be as defensible as the legal team you use to set it up is experienced. Don’t opt for a discount asset protection trust; always go with the experts at Dominion.
Contact Dominion to Learn More
Make no mistake, the right asset protection trust could be just what you need to secure your wealth for decades to come. Not only will you protect your estate from lawsuits and creditors, but you’ll also be able to ensure its financial stability and growth throughout inflation and even economic turmoil.
Dominion can craft a unique, highly effective trust just for you as soon as you contact us. Our legal experts, financial advisors, and trust attorneys are specialized in helping high-net-worth individuals protect their wealth from all types of potential threats. Get in touch with a representative today to learn more.