People often think that placing their assets into a trust for their own benefit in Florida makes the assets inaccessible to creditors, taxing authorities and nursing homes, but that is not true. A self-settled trust in Florida, whether revocable or irrevocable, does not remove the assets from access by one’s creditors, Medicaid qualification rules or taxation. A“self-settled” trust is a trust created by a person, allowing the person to use the assets, and holding the person’s own assets. If a creditor obtains a judgment against a person who has assets in a Florida trust the person created, the creditor can take the assets.
Certain states allow asset protection trusts to hold the Grantor’s assets and make them unavailable to the person’s future creditors. They are irrevocable trusts, which must be created a certain amount of time before a problem arises in order to be protected. One cannot take advantage of such a trust once a problem has already occurred.
One must name a trustee in the state that offers the asset protection trust. It probably does not make much sense to spend the money to create one unless there is some reason to do so. Since they must be created before a problem arises, these trusts are generally used by professionals who may be sued in the future due to their professions.
Often, people couple out-of-state asset protection trusts with out-of-state companies to hold the assets. One transfers the assets into the company, and issues the membership of the company to the asset protection trust. The company is then owned by the asset protection trust, not the person. So if the person is sued, the person is only a beneficiary of a trust, not an owner of the asset. Using a company allows the person to handle the assets even though he or she does not own them.
An out-of-state asset protection trust is a complicated and expensive procedure, but it is available for those who want to take advantage of the protection.