Protecting assets from potential creditors, litigation, or unforeseen financial risks is a common concern among Mississippi residents when planning their estates. The asset protection trust is one tool that is often discussed, but the legal permissibility of such trusts varies significantly depending on state law. Therefore, it is essential to understand how Mississippi law treats asset protection trusts before attempting to protect property for oneself or one’s family.
What Is an Asset Protection Trust?
An asset protection trust is an irrevocable type of trust designed to remove assets from personal ownership and place them under the control of a trustee for the benefit of specific beneficiaries. Assets held in these trusts are protected from future creditors as the grantor, who transfers the assets, no longer has direct ownership.
In contrast to revocable living trusts that do not provide creditor protection because the grantor retains control over the property, asset protection trusts require giving up significant control.
Does Mississippi Allow Self-Settled Asset Protection Trusts?
Mississippi currently does not recognize domestic self-settled asset protection trusts (DAPTs). A self-settled trust is a type of trust where the person who creates the trust (the grantor) is also one of the beneficiaries. Under Mississippi law, creditors can generally reach assets placed in a trust for the benefit of the grantor.
This principle is reflected in Mississippi Code Ann. § 91-9-505, which allows creditors to access trust assets if the grantor would benefit from them. In practical terms, this means that Mississippi residents cannot simply put assets into a trust and expect full protection from creditors.
What Types of Asset Protection Are Allowed in Mississippi?
Although Mississippi does not allow self-settled asset protection trusts, third-party irrevocable trusts are commonly used and legally valid. These trusts are established for the benefit of others, such as children or family members, rather than the creator.
Common trust-based strategies permitted under Mississippi law include:
- Irrevocable family trusts for children or grandchildren
- Spendthrift trusts, which limit a beneficiary’s ability to transfer or misappropriate trust assets
- Special needs trusts designed to maintain eligibility for government benefits
Fraudulent Transfers and Timing Concerns
One of the most significant limitations on asset protection planning is the timing of transfers. Transferring assets to a trust after a dispute arises or when legal action is foreseeable may expose the trust to potential legal challenges.
Mississippi follows the Uniform Voidable Transactions Act, which is codified in Miss. Code Ann. § 15-3-101 et seq. Under this law, transfers made with the intent to hinder, delay, or defraud creditors can be set aside by a court.
Asset protection planning should be done proactively, rather than in response to immediate financial challenges.
Trusts, Wills, and Avoiding Probate
Trusts also play a crucial role in avoiding probate and maintaining privacy. Probate is the court-supervised administration of an estate that applies to most assets passed under a will. In Mississippi, probate procedures are governed by Mississippi Code Ann § 91-7-1 et seq.
Assets properly titled in a trust typically pass outside of the probate process, allowing for quicker distribution and reduced involvement with the court. However, for a trust to be effective, it must be properly funded, meaning that assets must be transferred into the trust’s name.
Why Proper Legal Guidance Matters
Asset protection is one of the most misunderstood aspects of estate planning. Using online forms and out-of-state trusts can easily violate Mississippi laws, leaving assets vulnerable and families unprotected.
At Gregory D. Keenum, PA, we help individuals and families create estate plans that fully comply with Mississippi law and meet long-term financial and family goals. Our customized approach ensures that trusts and wills work together to provide protection, clarity, and peace of mind.
We advise clients on the best use of irrevocable trusts, beneficiary designations, and strategies to avoid probate, helping them to avoid potential legal issues that could invalidate their plans.
Planning Ahead Under Mississippi Law
Asset protection trusts can be powerful tools, but they must be used correctly and in accordance with state law. In Mississippi, asset protection can be achieved through third-party trusts, spendthrift provisions, and proactive estate planning, but not through self-settled trust agreements.
If you are considering strategies to protect your assets, review your will or establish a trust, it is essential to work with a knowledgeable estate planning attorney. Gregory D. Keenum, PA offers trusted guidance to help you protect your assets and your loved ones’ legacies. Contact our Booneville office today to schedule a consultation and start planning with confidence. We will help you create a plan tailored to your unique needs and goals.