Protect Assets Strategy

I was told by a financial adviser that for a non-profit organization it is not necessary to set up a trust to protect ones assets, which for us would consist of over three million dollars. That simply by saying in the minutes of the organization that particular funds are set aside for a particular project is sufficient.

And besides it worked before when we were sued and to set up and maintain a trust takes too much time, etc.

A properly maintained and run corporation should protect your personal assets from a lawsuit against the non-profit. That requires holding all meetings, maintaining minutes and making sure the officers, executives etc always act on behalf of the corp. However, should you have a personal lawsuit, your personal assets will be subject to a judgment against you. An irrevocable trust that holds your assets would probably be the best option to protect them. People are generally reluctant to transfer assets to an irrevocable trust because they think they’ll be relinquishing control. That is not always the case, nor should it be if you have competent legal and financial advice. That type of net worth is generally accumulated in 1 of 3 places. A business, an IRA or real estate. Keep in mind, there are different types of business entities that offer varying levels of protection. Specifically, an LLC in California, is protected from creditors against a personal judgment in a way regular corporations are not. Your financial advisor should know, understand and be able to distinguish between the pros and cons of corporate entities. An IRA is protected from creditors under the pension protection acts, so that shouldn’t be a concern. Other non-retirement accounts are not covered, and will require additional planning. If your home is your main or only asset, again, you can draft a personal residence trust, which can allow you the right to live in the house for life, with the beneficiary of your choice receiving the home when you and your wife pass. As for investment properties, see the discussion above on LLCs. Hope this helps. But I’d be concerned about your financial advisor’s simplistic answer to a complex problem.