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Private Wealth
July 05, 2024

Protecting Your Business Assets

Whether you have built it from the ground up or inherited the family business, you have worked hard to create a legacy for your family. One of the most effective ways to ensure that it lives on and your assets are protected is with a holistic estate plan that includes trusts.


Protect Your Business
Running a successful business is time consuming, and planning for the future may be easy to overlook or postpone. As you work to grow and maintain your company, focus on wealth transfer and estate planning to ensure your business and personal assets are protected for future generations. Take a step back from day-to-day operations and consider what you want to achieve for your business and your family over the long term.

Safeguard Your Assets
Trusts can be a favorable estate planning strategy for business owners. They can serve many purposes, including avoiding probate and reducing federal estate taxes, and can be used to transfer wealth without transferring control.

Asset Protection Trusts
In some states, self-settled asset protection trusts (APTs) provide added protections for assets that might be distributed to, or used to benefit, the settlor, allowing you to protect your accumulated wealth so you can pass your business and other assets on to your loved ones. These trusts offer protection from creditors, lawsuits and judgments against you or your estate. Until recently, creditors could access trust assets if those assets could be used for the benefit of the creator of the trust. To date, 21 states have introduced exceptions to that general rule, providing increased creditor protection.

Since an asset protection trust is irrevocable, it could complicate estate
planning if you change your mind about beneficiaries.

Creating the trust in a state such as Delaware or Ohio that has robust domestic APT statutes can increase the likelihood that it will be respected for creditor protection purposes. Separately, the particular trust structure will dictate whether the value of the trust assets will be included in the settlor’s estate for transfer tax purposes. Either way, APTs offer greater asset protection than would be afforded by individual ownership through a revocable trust.

Hybrid asset protection trusts, a form of APTs, benefit individuals other than the settlor, at least initially. These trusts can be written to include the settlor as a beneficiary at a later time or perhaps under circumstances where the settlor has no control, or empower a third party such as a trust protector to add the settlor as a discretionary beneficiary in the future. A hybrid APT may permit the settlor to be added as a beneficiary after 10 years have passed or after a contingency has occurred. In this way, some of the issues cited for self-settled trusts can be minimized or even avoided.

Revocable Trusts
By way of contrast, revocable trusts can be changed at any time, but do not offer asset protection. Assets held in revocable trusts are exposed to creditors in all 50 states. These trusts serve as a mechanism for managing your assets in the event you become incapacitated or pass away. It is not unusual for business owners to establish both a revocable trust for assets that fund their lifestyle and one or more irrevocable trusts, including an APT, for a “rainy day.”

Do Your Due Diligence
Protecting business assets for your family requires thoughtful due diligence in the context of a holistic estate planning process, which may include incorporating trusts. Discuss the implications of trusts with your estate planning attorney and wealth advisor to ensure they are the right fit for your long-term wealth plan.


This material provides information of possible interest to Glenmede Trust Company clients and friends and is not intended as investment, tax or legal advice. Any opinions, recommendations, expectations and/or projections expressed herein may change after the date of publication. Information obtained from third-party sources is assumed to be reliable but may not be independently verified, and the accuracy thereof is not guaranteed. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Clients are encouraged to discuss any matter discussed herein with their tax advisor, attorney or Glenmede Relationship Manager.