As your business grows and your bank account becomes ever bigger with the profits from your entrepreneurial endeavors, you might wonder whether it’s time to set up a trust. In fact, lots of business owners and startup founders wonder at what net worth they need trusts for asset protection and other purposes.
Perhaps because this question is so common, lots of advice sites and other sources will say, “Everyone needs a trust! Your net worth doesn’t matter!” But while this might be technically true, it’s practically infeasible and even outright bad advice.
So, at what net worth do you need a trust? In our expert opinion, $10 million is the golden line you need to cross in terms of your net worth before you should consider trust setup. Let us explain why.
Quick Summary – What’s a Trust?
In case you're unfamiliar with what exactly a trust is, here's a fast recap: a trust is a fiduciary vehicle that lets a trusted third party, called the trustee, hold, manage, and distribute assets on behalf of one or more beneficiaries.
Most people interact with trusts through the estate planning and inheritance processes. For example, an elderly business owner might set up a trust with specific rules stating that each of their grandchildren gets $1 million as part of their inheritance after they pass away.
However, trusts can also be used for asset protection. Asset protection trusts or APTs are powerful, secure vehicles to store wealth, property, and other assets to prevent them from being taken in the event of legal action or other threats.
Many entrepreneurs, doctors, extremely famous actors or artists, and other high-net-worth individuals use trusts to secure their wealth and give it space to grow safely, effectively establishing financial stability for the rest of their lives.
Others might use asset protection trusts to guard their estates against frivolous lawsuits or against overly aggressive court actions.
If you have your own business up and running, you might wonder whether it’s time to look into asset setup yourself.
When Do You Need a Trust as an Entrepreneur?
Setting aside estate planning, you do not need a trust as an entrepreneur in the earliest stages of your business’s lifespan.
Let's imagine that you set up a business and it starts to turn a profit. At first, you have a pretty successful year, so you incorporate your business, then you look into special business insurance from other countries.
As your business grows even further, you could set up holding companies, funnel money into payroll companies and different vectors, and so on. All of this enables you to gradually distance yourself from your company, maximize efficiency, isolate your revenues and costs, etc.
So, sounds like you need a trust, right? Not really.
The hypothetical business will be worth a few million dollars at most. You only need to start thinking about trusts as an entrepreneur when you hit $10 million in net worth.
$10 million is a highly unique number from the perspective of financial planning and asset protection. Why?
When you have that amount of money, a far greater range of financial options opens up for you. For example:
- With $10 million in net worth, you can afford the most premium services in terms of asset protection and trust setup, no questions asked.
Make no mistake, you do not want to settle for subpar asset protection or trust setup; going down that road could cause you to feel like your assets are secure, only to find out the terrible truth when the court comes knocking on your door
- $10 million in net worth also allows you to leverage that money effectively. In a sense, once you have this amount of money, you can use it to produce even more money in an extremely tax-efficient, low-risk way through the right investment vehicles
A trust for asset protection is only really worthwhile once you hit $10 million in terms of net worth. Think of asset protection trusts as the Lamborghinis of financial planning and estate planning – they’re not something that your average Joe picks up as an afterthought.
They are highly complex, specialized financial vehicles you should only form and maintain for specific purposes.
They can and often are highly effective and beneficial, but only if you set them up right. As a successful businessperson, you’re no stranger to taking advantage of new opportunities. But while you might be an expert in the business niche you dominated with your company, you don’t know how to manage your newfound wealth to maximum effect.
That’s why trust setup experts and financial advisors such as Dominion are exactly who you should contact when the time comes to think about trust formation.
Why Do You Need a Trust at $10 Million Net Worth?
Once you hit $10 million in net worth, having a trust is important for two primary reasons.
If you're already at $10 million, you already know that the more you grow in wealth, the more you also grow in terms of risk. Put another way, the more money you have, the more people want to take it and the more at-risk that wealth is.
Given that fact, having a trust to protect your wealth post $10 million is absolutely vital. With the right asset protection trust, it won’t matter if, for instance, your company is sued for a product manufacturing mishap – you can protect your personal assets and escape relatively unscathed.
For another example, if you’re a surgeon, an asset protection trust will protect you from a disgruntled patient who is determined to blame you for their health issues. Only through the right asset protection trust can you successfully insulate and shield yourself from the higher risk profile that comes with more money.
By the same token, you need a trust once you have $10 million because you’ll have much greater financial opportunities you can and should take advantage of. $10 million lets you set up a trust for the purposes of:
- Premium investment options, which you can use to grow your wealth over time, even without working another day
- Minimizing tax payments through the use of advanced tax mitigation strategies. Again, this helps your savings grow over time rather than being progressively whittled away due to harsh tax laws
- Growing your business in more creative and unique ways. Once you have $10 million thanks to your business, you can use that money to truly expand it into a worldwide brand and a juggernaut in your niche or industry
The Long-Term Benefits of Establishing a Trust at $10 Million
Establishing a trust under your name after you have $10 million in net worth provides you with numerous important long-term advantages, such as:
- Like we mentioned above, you'll be able to protect your assets much more capably from aggressive litigators, creditors, and anyone else who may want to come after your hard-earned money
- You'll be able to use the money you put in the trust to enjoy consistent financial growth and tax savings. You've probably heard the saying, "Your money should work for you." Putting your money into the right trust or other investment vehicle is the best way to do just that
- You can separate your wealth from your business more effectively, so if your business ever goes under due to economic factors outside your control, you’ll still be just fine
- You can even gain financial stability for the rest of your life with the right trust at $10 million
For example, you can come to Dominion right now with $10 million in net worth and tell us that you never want to work another day for the rest of your life. With our help, you can put your current funds into a trust vehicle and be able to enjoy a luxurious lifestyle until the end of your days.
Quarterly vacations? You bet. Fine dining anywhere you go? Of course. Peace of mind knowing that your kids’ college tuitions are taken care of? Absolutely. $10 million is the benchmark for overall financial prosperity, provided that you manage your money smartly and with the assistance of the right advisors.
Once you have $10 million in your name, you shouldn't ask yourself whether you should set up a trust. You should instead ask yourself who you should contact to help you with trust setup.
If you have $10 million and aren't taking advantage of trusts in some way, shape, or form, you aren't using your money as effectively as possible.
Rely on the Experts for Trust Setup
In the end, setting up a trust is a major milestone in your career as an entrepreneur or high-net-worth individual. That's why you shouldn't settle for anything but the best.
The experts at Dominion can help you set up a trust, understand how it works, and ensure that it performs according to your expectations and objectives. More than that, we’ll ensure that your trust provides maximum asset protection and effectively defends your estate against aggressive litigation for years to come. Contact us today.