Trusts are designed to hold your assets, making them more convenient to transfer to beneficiaries and giving you certain tax advantages. There are different types of trust funds, but asset protection trusts, in particular, allow you to keep your assets safe from concerns like taxes and litigation.

For some individuals, an asset protection trust is an important factor in financial planning. Here are the details of how you could benefit from creating a trust to hold important assets. 

What is an Asset Protection Trust and Who Should Get One?

An estate planning package  includes wills, trusts, and other important documents used to determine what will happen to your assets after your death. However,  asset protection trusts can also have an impact on your finances while you’re still alive.

An asset protection trust is specifically designed to keep your assets safe from people who could quickly wipe out large amounts of savings, property ownership, and more. 

Creditors seeking payment for debts, for example, can demand that you pay them with funds set aside for retirement or other crucial purposes. Lawsuits from litigious people in your life can also cost a lot in terms of legal fees, not to mention judgments against you. 

Not everyone needs an asset protection trust, but certain people can benefit immensely from the security provided by a well-drafted trust. 

How Can a Trust Keep Your Assets Safe from Creditors?

An asset protection trust is a secure way to keep your assets safe in an irrevocable trust. This means that you transfer legal ownership of your assets to the legal entity of your trust.

That way, you don’t have legal control over the assets, and you also don’t have the power to change the terms of your trust. However, you can designate yourself as a beneficiary. 

It’s possible to draft a trust that gives you access to vital assets like personal property or your residence, but overall, the goal is to ensure that your trustee is actually legally responsible for the control and management of all assets in the trust.

Transferring Legal Ownership

When you transfer legal ownership to the entity that is your trust, it’s virtually impossible for creditors or courts to demand you to use those assets as payments.

Asset protection is a vital consideration for some people. It’s crucial to get an asset protection trust if you are in a high-risk profession in industries like medicine, real estate, or other professional businesses. 

If you expect to be sued or face large debts, it is likely worth the effort to establish a trust that will protect your wealth.

The process of establishing this type of trust is complex, but transferring the assets is equally important. You’ll need to go through the process of transferring legal ownership of those assets to your new trust, which generally requires a lot of work from your attorney, financial planner, and other professionals. 

What Type of Asset Protection Trust do You Need?

Asset protection trusts include several different types of trust funds that serve a variety of needs. The details of your trust will vary according to your specific needs. 

For example, some people specifically create trusts to keep their assets safe in case they face lawsuits. For business owners and people with public-facing jobs, this can be concerning and therefore, would require financial planning.

Others may wish to use a trust to protect their assets because of medical concerns. If you don’t protect your assets, medical procedures can quickly use up large sums of money or property. 

Irrevocable Beneficiary Inheritance trusts

These trusts can be integrated into your existing estate plan, whether you have an irrevocable or revocable trust. After your death, the asset protection trust is effective to protect the trust assets for your beneficiaries.

If one of your children has considerable debts, then the trust will prevent debtors from collecting the money from their inheritance. Similarly, if one of your children is getting a divorce, the asset protection trust will prevent an ex-spouse from walking away with a chunk of the inheritance. 

Special Needs Asset Protection Trusts

Special needs asset protection trusts are designed for individuals who rely upon disability and other government benefits. If you have a child or other beneficiary who relies upon Medi-Cal, for example, an inheritance can disqualify them from the medical insurance they depend upon. 

Without these protections, medical costs could eat up an inheritance quickly. A beneficiary can use a trust like this to get access to high-quality medical care, including in-home assistance.

A trust catered to those with special needs will allow for the disbursement of funds on a regular schedule. That way, a disabled individual can cover general costs of living or supplement their income with an inheritance. 

Medi-Cal Planning Trusts

Medi-Cal can help you cover the costs of healthcare and quality for financial assistance from the state. A  trust can hold important assets such as your home or retirement account. 

However, without protection from a trust, Medi-Cal can seek repayment for the costs of your medical care through the estate repayment program. This program seeks to use your estate to cover the costs of nursing home care, hospital stays, and more. 

Medi-Cal can make a claim to recoup that money, using assets such as your home and other property to repay it. A trust allows you to use Medi-Cal and still be able to pass your house on to family members.

Work with a Probate Attorney to Help You Protect Your Assets

If you find yourself to be a beneficiary of a family member’s wealth which has to go through the probate process, A probate attorney Orange County can help you navigate through the probate, and afterwards find the ideal way to protect your newly inherited assets through careful estate planning.

Set up a free consultation to help you learn more about how a trust can help you achieve your financial goals by planning and protecting your assets.

Contact us at Parker Law Offices today at (949) 385-3130.

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