What are the tax implications of asset protection strategies?

Asset protection strategies can help individuals protect their assets from legal claims, bankruptcy creditors, and other liabilities. However, despite offering protection from certain liabilities, these strategies can have tax implications in the state of Washington. Anytime a person’s assets are moved from one entity to another, taxes may need to be paid. For example, transferring assets from an individual name to a trust will be subject to capital gains taxes. Furthermore, transferring assets into an asset protection trust often comes with a transfer tax, payable to the state of Washington. Additionally, asset protection strategies may require the payment of generation-skipping transfer taxes. These taxes are imposed when property is transferred to grandchildren and other persons more than one generation away. In the state of Washington, a generation-skipping transfer tax can range between 5-15%. Though tax implications are an important factor to consider when employing an asset protection strategy, these taxes may still be outweighed by the additional protection gained from these transfers. That said, individuals should always consult with a qualified tax attorney to ensure that any asset protection strategy is tax compliant.

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What are the tax implications of asset protection strategies?

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