As the New Year begins, I know I personally am looking forward to a refresh and changes in 2023. With imminent changes in laws related to estate planning, protecting your assets beyond a simple will-based plan may be of interest to you. Estate Plans are not one-sized fits all, so it is important to assess whether or not an Asset Protection Trust is right for you.
If you’ve previously done your estate plan and thought a simple will and power of attorney were all you needed, your circumstances may have changed. You may have started or closed a business, had another child, remarried, or even come upon an inheritance. It’s important to re-evaluate your plan a year or so after creating your plan and every three years after that to make sure that plan still fits your current needs. More often than not, something in your life has changed that is cause for you to re-evaluate your prior planning.
A Wealth Protection Trust just may be the right choice for you! Virginia is currently one of 15 states that recognize Asset Protection Trusts. In 2012, Virginia amended its implementation of the Uniform Trust Code to allow for Wealth Preservation Trusts, an irrevocable trust that you create yourself in which you or a trusted family member either retains a right to receive income or property that becomes part of the trust. Its purpose is both to protect you from errors and omissions you might make yourself, and to shield the family assets in the trust from predators. It more or less functions like a trust that someone else created for you and your family and funded with assets that he owned. The difference is that you create the Wealth Preservation Trust yourself, making gifts of property or accounts of yours that might be needed to support your family at some time in the future.
Who might want or need the protections of a Wealth Preservation Trust?Those who would benefit the most from a Wealth Preservation Trusts are entrepreneurs, those that run at a higher risk of being sued (physicians, dentists, architects, contractors, etc.) and people with high net worths that want to secure a “nest egg” for themselves and their family. Additionally, the divorce rate in the US is over 50%, so it is important to consider all implications that a divorce or separation may have on your assets and your interests.
Under Virginia law, a properly drafted Wealth Preservation Trust offers immediate protection against people who seek to lay claim to your assets in the future (after you establish and transfer assets to the trust); and against present creditors and claimants after a five-year waiting period. Unfortunately, a Wealth Preservation Trust or similar irrevocable trust cannot be used to delay, hinder, or defraud your creditors. In fact, if a creditor can prove that a “fraudulent conveyance” to a Wealth Preservation Trust was made by you, the trust may be set aside, and attorney’s fees may be awarded to a creditor who proves fraudulent intent. The takeaway is that a Wealth Preservation Trust should be set up during “good times” – before any legal claims are filed or are even likely, before a professional error or omission occurs, and before extraordinary amounts of debt are incurred.
Suffice to say, the time may be now to act & secure your assets in a Wealth Preservation Trust to protect your assets and future! It is important to use a TRUSTED attorney in Virginia with experience in these types of plans to avoid any errors and to properly comply with state laws. If you are interested in setting up a consultation with myself or one of our other experienced estate planning attorneys to discuss a Wealth Preservation Trust, please call our office & we will be glad to assist you in creating the plan best for you and your situation.
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