We have compiled a short list and corresponding explanation of the four most basic methods that will help you protect your assets from lawsuits.

The Children’s Trust

The Children’s Trust is set up to directly benefit your child. You will not have access to funds once they are placed into the Children’s Trust. Each spouse may put a maximum of $12,000 per year into the Children’s Trust. If your child is over the age of 14, you shift income tax on the gifted assets when you put money into the Trust. As stated before, once you put money into the Trust, you cannot retrieve it. You also cannot transfer the money during a lawsuit, when a claim against you is pending. Thus, it is smart to periodically invest money into your Children’s Trust so that your children will have sufficient support in the event that your estate is depleted.

Family Limited Partnership

A Family Limited Partnership is like a limited partnership for business assets in that you and your family members will have control over a mutual pool of assets. There are two different types of Family Limited Partnership interests: General Partnership interest and Limited Partnership interests. The Limited Partnership interest keeps your involvement at a minimum. As with a business partnership, each partner (or family member) has access to a specified amount of funds when the assets are distributed.

Foreign Asset Protection Trust

A Foreign Asset Protection Trust is like having a foreign bank account because your transactions will take place overseas. With a little help and planning, you can protect yourself and your family from predatory lawsuits against you. The above methods not only save you from losing your entire estate, but they are also strategic ways to set aside funds for your beneficiaries.

The Irrevocable Life Insurance Trust

An Irrevocable Life Insurance Trust, otherwise known as an ILIT, is a smart move for individuals even if they are not faced with litigation. An ILIT allows you to pass your life insurance policy on to your heirs tax-free upon your death. The trustee purchases a life insurance policy on you. You provide the funds for him to purchase the policy through tax-free gifts. Unlike a direct beneficiary designation, you can control how the funds from an ILIT are spent. You can designate a portion of funds to education, individuals, and other causes to ensure that your hard-earned money is spent how you want.