Asset protection is one of the most important planning tools
for America's aging population, especially in our current tumultuous
economy. One new tool in protecting your assets is the Irrevocable Pure
Grantor Trust -- AKA, the iPugTM.
iPugTM trusts are not based on any state statute, but are instead
grounded in century-old and well established common law. This means
more stability in courts and more peace of mind for those who opt to use
an iPugTM trust. In fact, the iPugTM is beneficial for nearly all
Americans. This is because the iPugTM is taxed as a grantor trust,
meaning the taxes are passed through to the grantor -- the trust itself
is not individually taxed. This is beneficial for anyone with assets
valued at less than $5 million -- i.e., over 99% of Americans.
There are three types of iPugTM trusts:
(1) the income-only version,
(2) the control-only version, and
(3) the third-party version.
In the income-only version, the grantor of the trust gives up the rights
to the assets he or she puts in the trust -- these assets are only
available to the beneficiaries. However, the grantor retains the rights
to any income the trust accumulates. One downside to this version of
the trust is that creditors also have access to this profit, though they
do not have access to the any other assets within the trust.
The control-only version of the trust gives the grantor full control
over all assets and all income of the trust. Creditors cannot reach any
of the assets therein, and the grantor can distribute the assets to
anyone he or she chooses -- the only exception being the actual grantor.
Finally, the third-party version is where grantors create the trust
for the benefit of a third party. Usually, this involves adult children
creating the trust for their parents for their parents' lifetime. This
version is primarily used when parents have already transfered assets
to children but are affraid or concerned that if they need them, they
might not have access to the asset. This version is created and the
parents are named as the beneficiaries of the trust. Further, assets
within the trust are protected from the children's creditors and are not
affected by divorce.
View more from the Florida Estate Planning Lawyer Blog.
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