When New Jersey residents consider filing for bankruptcy, one of the things they should evaluate before filing is whether or not they have any trusts. This is important because some trusts can be used to pay creditors during a bankruptcy. Therefore, even if someone has gone through estate planning to set aside money for his or her heirs, this money may be up for grabs if he or she files for bankruptcy.
In our previous post, we started looking at an article discussing the effectiveness of self-settled asset protection trusts. Generally speaking, asset protection trusts are trusts set up for the purpose of avoiding or mitigating the consequences of divorce, taxation and bankruptcy on the trust's beneficiary. A self-settled asset protection trust is one in which the beneficiary is the one who set up the trust.
A recent Forbes article took a look at the general effectiveness of asset protection trusts in light of a recent Alaska case in which a man who set up and funded an asset protection trust was unable to protect his assets from future creditors in bankruptcy.