As a high-net-worth individual, keeping your wealth safe should be one of your top priorities. Whether you need to defend your funds, estate, or other property against time, creditors, or lawsuits, there's a trust instrument that's just what you need.
All trusts operate with the same basic principle: you put control of the assets stored within the trust into the hands of another party, like an experienced trust law firm.
Depending on how your trust is set up, you and/or other beneficiaries can then receive income or assets from the trust once certain conditions are met.
Despite their many use cases and effectiveness, you can't just set up any trust and expect it to work as you need. Instead, you need to understand the different types of trusts and how to choose the right one for your specific objectives.
Revocable and Irrevocable Trusts – Broad Trust Types That Apply to Any of the Below Trusts
The two core types of trusts are revocable trusts and irrevocable trusts. The difference? It’s in the name – a revocable trust is one you can change or modify after it is put into place, so long as you are of sound mind or legally competent.
An irrevocable trust is the opposite; once it’s set up, you can’t (easily, at least) make modifications to the trust if you change your mind about its purpose, distribution schedule, or something else.
The only way an irrevocable trust can be changed is through a specific court order or if all the beneficiaries of the trust approve of a proposed change.
Some types of trusts are exclusively one or the other. For example, any asset protection trust worth your time and money will be irrevocable – the last thing you want to do is set up a trust for asset protection that you can modify.
Doing so would make it trivially easy for a judge to tell you to access the assets in the trust to pay creditors’ bills, lawsuit damages, etc.
Other trusts can be revocable or irrevocable, depending on your goals and the beneficiaries you have in mind. Working with knowledgeable experts in trust law and setup will help you determine whether the trust instrument you need should be revocable or irrevocable.
Other Types of Trusts
Aside from revocable and irrevocable trusts, you can set up certain trust vehicles intended for specific purposes or financial goals. Here are some examples.
Asset Protection Trusts
Asset protection trusts are some of the most effective legal instruments you can use for wealth defense as a high-net-worth individual.
In a nutshell, you can put money, property, and other assets into an asset protection trust (preferably in an offshore jurisdiction) and rest assured that creditors and courts won't be able to get those assets, even if they demand them from you.
With a properly set up asset protection trust – such as a Dominion-style, essentially-impenetrable trust made of legal titanium – you’ll be able to tell your opponent that you don’t have access to those assets and, therefore, can’t give them up.
A good asset protection trust will make it far too costly and time-consuming to get to your wealth.
If you’re interested in setting up an asset protection trust, get in touch with Dominion today. These instruments can be highly effective, but they need to be written with perfect language and placed in the perfect jurisdiction to maximize their overall protectiveness.
Joint Trusts
A joint trust is one made by two different individuals. For instance, if you and your spouse want to set up a trust for wealth distribution or generation over the coming decades, you can both set up a joint trust.
If one party in a joint trust passes away, control over the assets within that trust automatically passes to the surviving party – they become the trustee.
Joint trusts are like a financial “power couple” – they work together to simplify estate planning for couples who share similar money goals and trust each other completely.
You’re putting your money eggs in one basket but in a good way. It’s a simple, straightforward way to make sure your loved one is taken care of and your shared assets are protected. However, just like any relationship, a joint trust isn’t always the perfect fit.
If you have children from a previous relationship or specific wishes for how your assets should be divided, you might need a different kind of arrangement. It’s always best to talk to an expert to see if a joint trust is right for you.
Insurance Trusts
An insurance trust is another type of irrevocable trust, and it’s one established with an insurance policy as the primary or only asset. These trusts are used to avoid estate taxes on money that comes out of an insurance policy when the grantor passes away.
For instance, say you have a valuable insurance policy on your land and property estate. If you place that insurance policy into an insurance trust, more of that insurance payout will be passed on to your beneficiaries later on than if it was outside the trust, assuming that the insurance policy is ever used, of course.
Testamentary Trusts
A testamentary trust is a trust created through a will. It can also be known as a will trust or a trust under will. Naturally, these trusts don’t “activate” until the grantor passes away.
The grantor of a testamentary trust should include instructions as to the management and distribution of the trust assets in their last will and testament.
This can be a useful tool to ensure that only certain people benefit from your estate or wealth after you pass away or to make sure that your assets are distorted properly.
Just keep in mind that a testamentary trust doesn’t save your estate from the probate process. Because of this, any assets within the testamentary trust will become a matter of public record. If privacy matters, there are other trust options you can take advantage of.
Special Needs Trusts
Special needs trusts are special instruments meant to benefit a physically or mentally disabled person under the age of 65. The beneficiary has to need lifelong care in order to qualify.
Think of these trusts as clever ways to financially provide for a disabled family member without compromising their eligibility for Medicaid, SSI, and other supplemental government programs.
Spendthrift Trusts
A spendthrift trust distributes its assets to beneficiaries over time instead of all at once or in a lump sum.
The use cases for this should be obvious; for instance, if you want to provide your great-grandchildren with a big sum of money for their college educations, you can use a spendthrift trust to make sure they get some of the money each school year, not in a one-time gift that they can potentially spend irresponsibly or otherwise waste.
Credit Shelter Trusts
Credit shelter trusts are popular tools for the very wealthy, as they can potentially reduce or even eliminate estate taxes when assets are passed on to beneficiaries. Credit shelter trusts also provide extra rights to surviving spouses.
Depending on how you set up your credit shelter trust, monetary needs for medical expenses, education, etc., could be covered by trust distributions.
On top of that, any assets that are left in the trust after the surviving spouse from an original pairing passes away may be able to be transferred to the last beneficiaries without estate taxes kicking in.
Charitable Trusts
A charitable trust is, of course, a trust set up for the benefit of some charitable organization, like a nonprofit charity, shelter, etc. Charitable trusts are typically irrevocable.
On the plus side, they can offer substantial tax benefits and generate income, which will automatically be available to the charitable organization(s) of your choosing.
Whenever you set up a charitable trust, at least one organization – not an individual – has to be the trustee. Then they can invest in the trust and receive a regular stream of income.
Which Trust Do You Need?
There are lots of trusts to choose from, but in most cases, each trust’s use case or purpose is in the name. For example, an asset protection trust is for – you guessed it – protecting assets from litigation, creditors, and other potential legal threats.
On the flip side, a charitable trust is a special vehicle you set up to continually produce charitable donations to the nonprofit organizations of your choice. The best way to set up one or more trust instruments is to sit down with a specialty firm like Dominion to:
- Determine your short and long-term goals. You might want to protect your wealth right now, but maybe you also want to set up your grandchildren for financial stability decades into the future
- Come up with an asset protection and wealth management plan. This will incorporate all elements of your finances to achieve true wealth independence and stability for the rest of your life
- Set up your trusts in the right jurisdictions, not to mention ensure they are drafted with the right clauses and managed by the right individuals or organizations
The above breakdowns of different trust instruments are bare-bones and simplified. There’s a lot that goes into each trust instrument, how it’s drafted, and more. If you have questions about different trusts and how to use them to maximum effect, getting in touch with Dominion is your best bet.
Get Started with a Dominion-Style Asset Protection Trust
If you're an entrepreneur, surgeon, or other high-net-worth individual who needs to defend themselves from creditors and aggressive lawsuits, you can get started protecting your wealth with Dominion. Our knowledgeable legal and financial experts are the perfect individuals to put your trust in – literally!
With over 100 years of experience shared between our members and hundreds of millions of dollars protected for our clients, we know the ins and outs of asset protection case law and precedent.
With our assistance, you’ll set up an asset protection trust in the ideal, most secure jurisdiction. And in the long run, we’ll set up your trust so it generates wealth and remains valuable for generations to come.
Get in touch with one of our representatives today to learn more.
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