Asset Protection and Estate Planning

Asset Protection and Estate Planning

Asset Protection and Estate Planning Attorney in Gilbert, AZ

Revocable Living Trusts

A revocable trust provides no asset protection for the trust maker during his or her life. However, upon the death of a trust maker, one can provide asset protection for his or her beneficiaries, with two important caveats.

First, the assets must remain in the trust. Once the trustee distributes the assets to a beneficiary, those assets are no longer protected and can be attached by creditors or a spouse’s creditors.

Second, the more rights the beneficiary has in compelling trust distributions, the less asset protection the trust provides. Generally, a creditor ‘steps into the shoes’ of the debtor and can exercise any rights of the debtor. Thus, if a beneficiary has the right to compel a distribution from a trust, so too can a creditor compel a distribution from that trust.

There are many drafting and planning techniques that can help protect a beneficiary's inheritance.

Inheritance Protection

Leaving an inheritance outright to a child is risky in this age of high divorce rates, lawsuits, and bankruptcies. Beneficiaries are often tempted to spend large sums when given large sums. Or, the inheritance may end up in the hands of your child’s spouse instead of your child or grandchildren.

Also, if a beneficiary has a disability, an inheritance may disqualify him or her from receiving government assistance. The government would require the beneficiary to deplete the inheritance in order to be eligible for government assistance.

There are a number of different types trusts that can be integrated into your revocable living trust plan to insure your money stays in your family:

Trusts for minor beneficiaries – Minor beneficiaries cannot legally accept an inheritance. A trust ensures that the minor’s inheritance is wisely invested and used only for the minor’s benefit.

Trusts for adult beneficiaries – Adult beneficiaries who are not good with managing money, in a lawsuit-prone profession, have an overreaching spouse, might get divorced, or have an addiction problem will benefit from a lifetime discretionary trust.

Trusts for surviving spouses – If you are worried that your spouse will not be able to manage their inheritance, will remarry, or will need nursing home care, you can create a lifetime discretionary trust for the benefit of your spouse.

Trusts for disabled beneficiaries – Disabled beneficiaries who receive an inheritance typically lose their government benefits and have to spend the inheritance before requalifying. An inheritance left to a special needs trust may be used to supplement, not replace, government assistance and will not cause disqualification, if drafted properly.

The revocable living trust offers many opportunities for Asset protection, even for people of modest means. I am available to answer your questions about asset protection and help you integrate this type of planning into your estate plan. Let my asset protection experience be your guide. Contact Andrew S. Mathers, P.C. Attorney at Law to schedule your consultation in Gilbert, AZ today.