Asset Protection Trust - Trusting the Trustee

Date : 12-July-2007

Dear Subscriber:

The biggest mistake you can make is to trust your Trustee when you don't need to.

Most Asset Protection experts take the position that the creator of an Asset Protection Trust should relinquish all control from day one. These experts normally aren't experts at all. Typically they got a form of trust from a visiting offshore Trustee who advised them that they can charge 25K if they can get some client to buy into their expertise. These “experts” advise their clients that the only safe and effective way to implement an Asset Protection Trust is to actually give 100 percent control over protected assets to some far away and often undercapitalized trust company. In short, they advise their clients that they must trust the trust company from day one with their hard earned nest egg if they want solid protection.

As I consistently point out, nothing could be further from the truth. As long as the creator of a trust implements his Plan when the financial seas are calm and retains plenty of unprotected wealth outside of the Plan to satisfy his reasonably anticipated debts, his Plan should be structured so that he retains control over the protected assets as long as the financial seas are calm. To do otherwise exposes the Settlor to a risk that the Foreign Trust Company will steal his hard earned money. Always a bad idea…and never necessary.

Normally, when I make the assertion that the Settlor should retain control over protected assets when the financial seas are calm, I am beset by a flood of emails saying that this is impossible. In particular, they argue that if the Settlor makes a conscious decision to abrogate control when attack comes that this is a fraudulent conveyance. My response is that they are sometimes right, and that is a risk I would never take. A solid Kinetic Plan NEVER puts the Settlor in a position where the Settlor takes any affirmative action to abrogate control. Instead, the mechanisms to have the Settlor removed from control are in place from the day the trust is created. The Settlor never takes any affirmative act. There is never any action by the creditor to remove himself from power…PERIOD.

The worse the Settlor has done is set up a Plan when the seas were calm with PLENTY of unprotected wealth to satisfy reasonably anticipated creditors. It is a big stretch to argue that some “old and cold” Asset Protection Plan set up years ago to remove the Settlor from power when serious attack comes is a fraud. To my knowledge, nobody has even tried this argument.

I hope this helps with dealing with the paradox or retaining control but avoiding the fraudulent conveyance trap. It's not easy; but when done right you should retain control and still remain protected from creditors.

I wish you a healthy and protected week.

Rob Lambert

ABOUT THIS EDITOR:

Rob Lambert, Founder and former law professor is considered to be foremost expert on tax compliant asset protection structures. A contributing editor to Lexus Nexus debtor creditors series of law books Rob's passion is implement client wealth plans that stand the test of time and hold up under duress.

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