A Look at Utah’s Asset Protection Trust Status – St George News

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CONTRIBUTED CONTENT — We live and work in an exceptionally litigious culture. From car collisions to dog bites to failed business deals, potential liabilities are constantly swirling around us like a cyclone.

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Home values ​​have increased dramatically over the past few years, and increasing our home equity can be very attractive to potential creditors. Such fears can often keep individuals up at night. Consumers and homeowners maintain insurance on their homes and personal property to cover potential losses. Most professionals maintain some form of errors and omissions insurance should liability arise in the course of professional endeavors.

However, setting aside the proper selection of business entities and the protection that comes with it, can we protect our assets from the liabilities that surround us? An answer comes to us via the status of asset protection trust in the Utah Code.

How do you know if an asset protection trust is right for you?

If you are already considering bankruptcy or are involved in litigation, it is probably too late to take advantage of the protection offered by this law. Likewise, if you’re looking to avoid child support or protect assets from illegal activity, an asset protection trust won’t do you much good.

However, if you are looking to protect some of your hard-earned assets from potential future creditors, an asset protection trust is probably the perfect tool for you.

One of the first questions people ask about these trusts is, “What kind of protection will I have and from whom?” The law defines the term “creditor” as a “creditor or other claimant of the settlor existing at the time of the creation of the trust; or a person who later becomes a creditor … a person who holds or seeks to enforce a judgment … or a person who is entitled to payment. This definition is quite broad, but very advantageous for those who take advantage of the protection of the law.

Provided the trust is properly set up and in compliance with the law, the creator or settlor of the trust will enjoy near blanket protection of a portion of their assets in the future. For example, the trust could benefit a physician by protecting his assets from a malpractice suit, a business owner by protecting his assets from bankruptcy, or a landlord by protecting his assets from litigation arising from ‘a car accident.

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Many people ask, “Isn’t that why we buy insurance?” The answer is yes and no. Insurance is essential, but is it enough? Most insurance will protect us from certain creditors, but that won’t help much in the event of bankruptcy or other insolvency issues. I like to say that insurance helps us protect our assets much like an umbrella protects us from a rainstorm. An asset protection trust takes this protection one step further by completely eliminating access to certain assets, thus removing them entirely from the path of the storm.

The actual application of an asset protection trust typically focuses on protecting most people’s largest asset: their home. A home with considerable equity is the ideal asset to place in an asset protection trust. Consider the difference between a business owner who goes bankrupt and loses all his assets and the business owner who walks away after bankruptcy with his house, and all of his net worth, still intact. With a little forethought and some strategic planning, individuals can save themselves from huge loss.

When determining whether an asset protection trust may be useful to you, consult your estate planning attorney and be upfront about your current financial situation. For an asset protection trust to have value, certain conditions must be met. For example, placing your assets in an asset protection trust cannot render you insolvent, nor can it transfer assets with the intention of obstructing, delaying or defrauding a known creditor.

However, the law sanctions other transfers if individuals wish to protect their assets against possible future creditors.

An asset protection trust is more than just an umbrella in life’s turbulent storms. It can provide you with the security and assurance you need to deal with potential financial disasters. Consult with your estate planning attorney to find out if an asset protection trust is the right precautionary measure for you.

As Benjamin Franklin said, “An ounce of prevention is better than cure.”

Written by ANDREW S. MCCULLOUGH, associate attorney at Brindley Sullivan. Contact him today for a free consultation.

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