What Is an Asset Protection Trust (APT)?

Trusts, in their many forms, provide powerful and versatile ways of estate planning beyond what a simple will can achieve. One unique option for passing on your estate while also securing those assets in the long term is through an asset protection trust.

There are domestic APTs and foreign APTs, though New York is not yet among the states that allow for domestic trust accounts. New York citizens can still protect their assets through a more costly foreign offshore trust, but it is important to first learn about the benefits of APTs to decide if this estate planning method is right for you.

What are the benefits of an asset protection trust?

Asset protection trusts function to safeguard your placed assets from creditors. APTs also provide the best protection available from lawsuits and other judgments against your estate. Keep in mind that APTs are irrevocable trusts, meaning you cannot change the trust after creation, though it is possible to schedule the occasional distribution of assets to the trustee.

When is an asset protection trust right for you?

Establishing an asset protection trust can sometimes cost upwards of $4000 in legal fees, and it is worth remembering that the ability to keep funds out of reach from creditors might only be a worthwhile benefit when discussing particularly significant assets. That said, it might be in your best interest to fund an APT if you wish to protect a business, real estate property, or even a large savings account.

Asset protection trusts are especially complex financial planning tools, so adding this option to your estate plan might require the expertise of financial experts and legal advocates. Doing so will help you keep important assets intact for your inheritors.