Sioux Falls Asset Protection Trust Lawyer

An estate plan decides how wealth will be owned, and ownership determines how well that wealth is protected.

Lawsuits, business liabilities, professional claims, and divorce can affect assets during a person’s lifetime, and similar risks can follow an inheritance into the lives of children and grandchildren. An estate plan can address both concerns by deciding which assets should remain in individual names and which should be held in a structure created to protect them.

Stuart Green Law builds asset protection into our comprehensive approach to modern estate planning. As a Sioux Falls, SD asset protection trust lawyer, Stuart Green works with clients to identify the wealth that needs protection, the people that wealth is meant to serve, and the South Dakota trust structures that fit those objectives.

South Dakota permits a person to establish a protective trust for his or her own benefit, which many states do not allow, and its laws also provide several options for protecting wealth left to the next generation. Clients in Sioux Falls, throughout the United States, and abroad can use those laws as part of their estate plans.

The Planning Question Asset Protection Addresses

Assets held in a person’s own name are generally available to that person’s creditors.

Claims can arise from business activity, professional work, real estate ownership, or circumstances that have nothing to do with how the person manages money.

Insurance and business entities can address part of that exposure. Each has limits, however. Insurance policies carry coverage limits and exclusions, and a business entity separates only certain liabilities from certain assets.

An asset protection trust can address exposure that those tools leave open. When a client transfers selected assets to an irrevocable South Dakota trust, the trust can create legal separation between those assets and claims that have not yet arisen.

The decision to create that separation is a planning decision. It is made while circumstances are stable, as part of deciding how the client’s wealth should be owned over the long term.

Protecting What Passes to Children and Grandchildren

Many clients are less concerned about their own creditors than about what will happen to their wealth after it passes to the next generation.

An inheritance that is distributed outright becomes the heir’s personal property. From that point forward, it is exposed to the heir’s own circumstances, which may include a failed business, a judgment, or a divorce in which inherited funds have been combined with marital assets.

A third-party spendthrift trust holds the inheritance for the heir instead. Because the parent created and funded the trust, the trust can protect the inheritance from many claims against the heir, and the heir generally cannot pledge or transfer the interest to others.

Protection does not require shutting the heir out. Depending on how the trust is written, an adult child may receive distributions for defined purposes, use property the trust owns, or hold a defined role in the trust’s administration as he or she matures.

Leaving assets in a continuing trust can protect wealth for heirs whose future circumstances no one can predict at the time the estate plan is signed.

Protecting the Client’s Own Wealth

A different structure is needed when the client wants to protect assets that may still be needed during the client’s lifetime.

Under a Domestic Asset Protection Trust, commonly called a DAPT, the client transfers assets to an irrevocable South Dakota trust and remains eligible to receive distributions at the trustee’s discretion. This structure is not necessary for every client, and determining who needs a DAPT is part of the planning process.

A Hybrid DAPT names the client’s spouse, descendants, or other family members as the initial beneficiaries and includes a mechanism through which the client can be added later. The client begins with greater separation from the assets. Some clients prefer that approach, including some who live in states that do not recognize self-settled trusts.

Both structures require the client to give up direct ownership. In exchange, the assets are held under South Dakota law by a trustee who decides when distributions are made.

An asset protection trust attorney in Sioux Falls can help clients compare these structures against their own need for future access before any assets are transferred.

Selecting and Structuring the Assets

Not every asset belongs in an asset protection trust.

Investment accounts are often straightforward to transfer. Closely held businesses and real estate can raise questions about ownership, financing, and existing agreements. Certain assets may already be protected under other law, and others may be poorly suited to a particular trust for tax or operating reasons. Stuart Green Law works with each client to identify the right assets for the particular trust.

Business and real estate holdings are frequently placed in an LLC whose membership interests are owned by the trust. The LLC layer adds another degree of separation, and it allows the business or property to continue operating under its existing management while the trust owns the interest in the entity.

The result is a protected portion of the client’s wealth that works alongside the assets the client continues to hold directly.

Coordinating Protection With the Rest of the Plan

An asset protection trust works alongside the client’s other estate planning rather than apart from it.

The assets placed in the trust affect the client’s tax planning, the provisions of the client’s will or revocable trust, the ownership of business interests, and the inheritance each beneficiary will eventually receive. Decisions about funding the trust should account for each of those connections.

Stuart Green Law can help coordinate these considerations with the client’s accountant, wealth manager, and other advisors so that the trust works in coordination with the rest of the estate plan.

How the Trust Maintains Its Protection

The protection an asset protection trust provides depends on how the trust is operated.

The trustee maintains the trust’s records, makes distribution decisions, and keeps the trust’s administration in South Dakota. For that reason, trustee services are part of the planning from the beginning.

Many trusts also name a trust protector, an investment advisor, or a distribution advisor. The firm’s Sioux Falls fiduciary services can help clients fill those roles if the family wishes to continue to work with the firm when their plan is implemented.

A trust established with clearly defined roles, consistent records, and distributions made through the trustee’s own judgment maintains the separation on which its protection depends. Stuart Green Law can also review existing trusts to confirm that their administration remains consistent with their terms and helps clients address common asset protection mistakes when they are found.

Why Timing Matters

Asset protection must be in place before a claim arises.

A transfer made after a lawsuit has been filed, or when one is reasonably foreseeable, may be set aside under fraudulent or voidable transfer laws. For that reason, this kind of planning is best completed while the client’s financial circumstances are stable.

Planning in advance does not depend on predicting a particular claim. It reflects the fact that exposure tends to accumulate through ordinary activity over many years.

Stuart Green Law’s Approach to Asset Protection Trusts

Stuart Green Law begins asset protection planning with the client’s estate plan as a whole rather than with a particular trust.

We consider the client’s sources of exposure, the insurance and entities already in place, the assets the client expects to need, and the beneficiaries the plan is meant to serve. From there, we determine whether protection should focus on the client’s own wealth, the wealth passing to heirs, or both, and we establish the structures and fiduciary roles that accomplish those objectives.

In some estate plans, other structures address part or all of the client’s exposure, and the role of the trust is adjusted accordingly.

Clients work directly with the attorney throughout the process. The attorney who drafts the trust understands why each provision was included, and that understanding remains available as the trust is administered.

Working With a Sioux Falls Asset Protection Trust Lawyer

South Dakota law allows asset protection to be built into an estate plan at two levels: protection for the client’s own wealth and protection for the wealth the client leaves to others.

The appropriate combination depends on the client’s exposure, need for access, family, and tax circumstances. Stuart Green Law helps clients in Sioux Falls, throughout the United States, and abroad incorporate South Dakota asset protection trusts into comprehensive modern estate planning.

If you are considering how to protect your wealth or your family’s inheritance, contact Stuart Green Law to schedule a consultation with a Sioux Falls, SD asset protection trust lawyer.