Does Someone Lose Control Of Their Assets After Creating An Asset Protection Plan?
Whatever level of control you retain, understand that the courts can generally take that degree of control away from you and deliver it over to creditors and predators. Therefore, great discretion must be used in deciding which type of control to retain and which to give up. Some of my clients want to retain control to a degree sufficient to appoint assets to their children or grandchildren. For example, I have a client who desired to retain the right to give Christmas and birthday gifts to her grandchildren and meet extraordinary needs of her children such as unexpected financial setbacks and unexpected medical expenses. I’m of the opinion that you may retain those rights without great fear of the court giving those rights to any creditors. This is because no creditor wants the right to give gifts to your child to meet their medical needs; that would not help the creditor at all. However, if you were to retain the right to give money to yourself, then the creditor is almost certain to desire that power. Further, if you want to retain the right to give gifts to anyone in the universe, the creditors would generally be happy to receive that power from the courts.
You can also retain the authority to appoint future trustees, but it would be wise to limit that trusteeship to a particular class of people, such as attorneys, CPAs, retired judges, or your children. Most of these people must be insured and will be subject to the rules of professional conduct that will compel them not to act on the best interests of the creditors over the best interests of your trust. Your children will be incentivized to act in the best interests of the trust because they expect that someday they may receive some benefit from that trust. Therefore, with some thought and care, you can retain rights to appoint future trustees for your trust without substantial risk of losing all control by virtue of this retained power.
You may also retain the right to give advice to the trustees as to investing or reinvesting the trust assets. For example, you may want to retain the right to direct the sale of a rental house that belongs to a trust and direct the trustee to purchase a different investment. The right to guide the investments of the trust is highly unlikely to cause a court to believe that you have retained complete control over the trust. Therefore, I do not have substantial concerns for clients who retain the right to direct assets inside the trust. I would, however, have very great concerns if the client desired to be able to appoint assets to a particularly broad class of people. Such a broad power seems likely to give rise to a failure of the asset protection trust at the most inopportune time.
For more information on Losing Control Of Assets In Asset Protection, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (405) 754-4166 today.
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