Asset Protection Terms and Definitions

Revocable Trust
In a living, or revocable trust, you name yourself as the grantor, the trustee, and the current beneficiary. You then transfer some or all of your assets to the trust. The terms of the trust require that the trust is to be used for your benefit during your life. After your death, the living trust continues for the benefit of your intended beneficiaries.

Trusts for Children
You can set up a trust for your children, too. The terms of the trust can specify which of the children's expenses to pay and under what circumstances.

Casualty Insurance
Casualty Insurance coverage is primarily for the legal liability of an individual or organization that results from negligent acts and omissions causing bodily injury and/or property damage to a third party. However, the term is broad and includes such property insurance as aviation insurance, boiler and machinery insurance, glass insurance and crime insurance.

Real estate investment trust (REIT)
A type of investment that pools the money of many individuals and acquires real estate or mortgages that are then owned proportionally by each investor.

Diversification
Holding several investments that have different risks. The concept of "Don't put all your eggs in one basket." The chance that a single stock or other investment will lose money is offset by the chances of your other stocks and investments making money.

Living trust
A trust that is established while the grantor is still alive. Compare to testamentary trust.

Spendthrift Trusts
A spendthrift trust is created specifically to provide asset protection for the beneficiary. These trusts are written so that the beneficiary can receive the benefit of the trust, but have no right to demand benefits from the trust.

Tax exempt entity
To hold the protected assets. The stock in this tax exempt entity can be held by an asset protection trust. As a result, the stock does not show up on the balance sheet of the taxpayer and the income from the assets is likewise off the tax return of the protected client.

Beneficiary
The person who receives the benefits or gifts from an estate, insurance policy, IRA, pension plan, or trust.

Durable power of attorney
A power of attorney that remains valid when the principal becomes incapacitated.