Asset Protection Terms and Definitions

Portfolio
A collection of securities assembled for an investment goal.

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-deferred earnings (investments)
Earnings on which taxes are not paid until a future date, usually when funds are withdrawn. The TSP and traditional IRAs are examples of vehicles that offer tax-deferred earnings.

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

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.

Secret Bank Accounts
Infamous numbered and bearer Swiss bank accounts. Switzerland has come under much scrutiny through scandals relating to money laundering and holding assets

Offshore Financial Centers OFC
A recent study found that by the end of 1997, the share of cross-border assets held in the offshore sector ($4.8 trillion) accounted for more than half of all cross-border assets held globally.

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.

Totten trust
A savings account that allows the depositor to open the account as trustee for someone else (no real trust is set up). Account owners may use the funds as they see fit during their lifetime, and then upon their death the account balance is paid to the named beneficiary.

Municipal bond
An investment security for which a state or local government promises to pay an amount at maturity (usually more than five years in the future) with interest, in return for a current investment. Municipal bonds are generally tax-free, but not always.