COVERING YOUR ASSETS: A look at Utah's Asset Protect Trust Statute.

AuthorMcCullough, Andrew S.

We live and work in an exceptionally litigious culture. From car accidents, to dog bites, to unfruitful business deals, potential liabilities swirl around us like a cyclone. Such fears can often keep individuals up at night. Consumers and homeowners maintain insurance on their homes and personal property to ward off a potential loss. Most professionals maintain some form of error and omission insurance should liability rear its ugly head through professional endeavors. Setting aside proper business entity selection and the protection that affords, how can we best protect our assets from the liabilities surrounding us? One answer comes to us via the Asset Protection Trust statute in the Utah Code.

How do you know if an asset protection trust is right for you? If you are already contemplating bankruptcy or have already found yourself embroiled in litigation, it is likely too late to take advantage of the protection offered by this statute. Likewise, if you are seeking to avoid child support or protect assets derived from unlawful activities, an asset protection trust won't be of much help. However, if you are looking to protect a portion of your hard-earned assets from potential future creditors then an asset protection trust is likely the perfect tool for you.

One of the first questions individuals ask about these trusts is: "what kind of protection will I have and from whom?" The Statute defines the term creditor as a "creditor or other claimant of the settlor existing when the trust is created; or a person who subsequently becomes a creditor ... one holding or seeking to enforce a judgment ... or one with a right to payment." This definition is quite broad, yet, quite beneficial to those employing the statute's protection.

Providing that the trust is correctly established and complies with the statute, the creator, or settlor, of the trust will enjoy the almost blanket-like protection of a portion of his or her assets going forward. To illustrate, the trust could benefit a doctor by protecting his or her assets from a malpractice lawsuit, a business owner by protecting his or her assets from bankruptcy, or a homeowner by protecting his or her property from litigation resultant of a car accident.

Many people ask: "isn't this the reason we buy insurance?" The answer is yes and no. Insurance is essential, but is it enough? Most insurances will...

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