Why Not to Use an Irrevocable Trust for Asset Protection - YouTube

Hi. Lee Phillips here.

I want to talk to you about why you wouldn't use a or an irrevocable trust for asset protection.

Now, you understand that a revocable trust will not give you asset protection because it's revocable

and I get a judgement against you and I walk into court I say this is a revocable trust,

make him revoke it and give it to me.

So, revocable trust,

if it has that word, "revocable," in it,

no asset protection.

Ah.

But, how about an irrevocable trust?

Well, an irrevocable trust actually,

I'm going to say, does give you asset protection.

But what you don't understand is

if you have an irrevocable trust,

you have moved the assets into it irrevocably

and you can't get them back.

They're not yours.

They're gone.

The law says that you can't set up an irrevocable trust

with your assets

and have that trust give you benefit.

That would be cheating.

If you could set up a trust,

move the assets into it,

and make it so your creditors couldn't get them,

but you have all the benefit of those assets,

that's just cheating, isn't it?

So the law basically says you can't do,

or you can't set up, what is called a self-settled trust.

A self settled trust.

It's an irrevocable trust that you set up,

you move the assets into it,

and then you get the benefit out of it.

That's pretty good.

Now, if you want to set up an irrevocable trust for your kids,

or somebody else,

and move those assets into that trust,

as long as it's a spendthrift trust--

that means it has a spendthrift provision in it,

and we have a YouTube on spendthrift provisions--

then the beneficiaries, the kids,

their creditors can't get to the trust.

Your creditors can't get to the trust

because it's not your property anymore.

You don't get any benefit out of it.

It's gone.

Now, there are a couple of exceptions to that.

One is what we now call the asset protection trusts,

the Legacy trust,

it started out in Alaska so sometimes we call it an Alaskan trust,

basically a few of the states, there's about a dozen of them now,

have decided that you can set up a trust,

self-settled trust,

move assets into it,

and get benefit out of it.

And that's not bad.

But there are a bunch of provisions.

Provided,

the assets are in the trust at least, like, 5 years

and then they'll lock down

so your creditors can't get them.

Now, Utah actually has a 60-day provision if you publish and a bunch of other stuff

where you can lock those assets down into the trust.

The trust has to be made in that state,

usually the trustee has to be at least a resident of the state,

if not a banking institution in the state.

And we've got other stuff,

other YouTubes on Legacy or these asset protection trusts.

By the way, the courts are starting to attack them; I'm not 100% sure they're going to survive

because the courts are saying "No, no, no, no.

This is really a self-settled trust, isn't it?"

Alaska did it to get a bunch of stuff,

assets,

up in Alaska under the banking industry's management.

So they wanted money up there.

But generally, that's still a self-settled trust, I think.

So, when you have an irrevocable trust,

you can't get the benefit of it, but you've got to remember,

whoever does get the benefit of it,

you have given those assets away to them.

They've actually clocked on their gift tax issues.

That's another story

but when you give it to those beneficiaries, you give it to them.

And you do the Crummey letter and do all the rest of this, that, and the other junk

so that it qualifies to the annual exclusion.

That's the $15-16,000 or whatever it is this week, it's gone up.

I think I started out below $10,000.

Shows you how old I am.

At any rate, you're not really going to use

an irrevocable trust for asset protection

because you can't get the benefit out of those assets.

If you're willing to give the assets away,

ok.

You can protect them from your creditors.

But hey, give them to me.

They'll be protected from your creditors too.

Forget that irrevocable trust stuff, ok?

This is Lee Phillips, hoping.