How Trusts Can Protect Your Business Assets

When you own a business, your assets are at risk from a wide variety of threats. A lawsuit over an accident can lead to a huge judgment against you, even if you personally did nothing wrong. Or a problem with a business deal could lead to losses that drain business assets to the point where you could lose viability. 

With the right strategies, however, you can protect your business assets from unnecessary loss. A trust is often the most effective means of achieving that objective. At PayneLess Law, we frequently build trusts as part of a comprehensive asset protection plan.

Understanding Trust Operation

A trust is a structure for holding property. Assets in a trust are managed by a fiduciary known as the trustee, and those assets are held for the use of the beneficiary. When a trust is set up to be revocable, the structure is loose and flexible. It can be easily changed, and property can be moved in and out of the trust without restriction. This type of trust is ideal for personal estate planning because it provides numerous benefits without imposing administrative burdens. While a revocable trust can enable beneficiaries to avoid probate, this type of trust does not provide much protection for assets.

To secure business assets, you need an irrevocable trust. Once property is transferred into an irrevocable trust, it belongs to the trust and cannot be removed by the trust creator. For that reason, creditors of the trust creator cannot access the assets. Similarly, creditors of the beneficiary cannot access the assets either. Instead, the trustee manages and protects the assets, distributing them to the beneficiary only as allowed by the terms of the trust document and any regulatory requirements. 

Arizona law does not allow the creator of the trust to be a beneficiary, which adds another layer of protection for the assets but can create challenges depending on the need for these assets.

Asset Protection Trusts Must Be Established Before the Need Arises

If you wait until someone sues you to try to move your business assets into a trust, it will be too late. The law allows assets in trusts to be protected from future claims, not the claims of current creditors. Attempting to move assets into an irrevocable trust when you know someone could have a claim against those assets is considered fraudulent action, and the transfer will not be respected under the law.

Instead, it is important to set up an asset protect trust ahead of time as a precautionary measure.

Find Out How PayneLess Law Can Protect Your Business Assets

When you’ve worked hard to build a business, it makes no sense to accept unnecessary risk when it comes to your business assets. At PayneLess Law, we can build a trust and develop other strategic provisions to protect your business assets for the future. We work to structure provisions to give you the maximum flexibility allowed by law while still providing the right level of protection. We’d be happy to discuss the specifics about how a trust would operate in conjunction with your particular business.