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Some people believe that a living trust can protect their assets from creditors. This is not true!

The property in your living trust can be reached by your creditors during your lifetime. This is because you have complete and exclusive power over the property in your trust while you are living.

On the other hand, if the property is transferred to an irrevocable trust, the legal result is completely different. Property transferred to a bona fide irrevocable trust cannot be reached by your creditors. This is because you no longer have control over property placed in an irrevocable trust.

The property in an irrevocable trust is only shielded from your creditors if it is a “bona fide” irrevocable trust. If you set up an irrevocable trust solely for the purpose of defrauding creditors, it is not a bona fide irrevocable trust.

If you have questions about living trusts, please do not hesitate to contact my office.

Lifetime trusts are not just for young beneficiaries, problem beneficiaries, or financially inexperienced beneficiaries.
 
In this day and age of frivolous lawsuits and high divorce rates, discretionary lifetime trusts should be considered for all of your beneficiaries.
 
What is a Discretionary Lifetime Trust?
 
A discretionary lifetime trust is a type of irrevocable trust that you can create while you are alive – in which case you will gift your assets into the trust for the benefit of your beneficiaries – or after you die – in which case your assets will be transferred into the trust for the benefit of your beneficiaries after death.
 
The trust is discretionary because you dictate the limited circumstances when the trustee can reach in and take trust assets out for the use and benefit of the beneficiaries. For example, you can permit the trustee to use trust funds to pay for education expenses, health care costs, a wedding, buying a home, or starting a business. If the trust is funded with sufficient assets that are invested prudently and you choose the right trustee to carry out your wishes, the trust funds could last for the beneficiary’s entire lifetime.
 
How Does a Discretionary Lifetime Trust Protect an Inheritance?
 
With a discretionary lifetime trust each of your beneficiaries will have a fighting chance against lawsuits and divorcing spouses because their inheritance will be segregated inside of their trust and away from their own personal assets. By creating this type of “box” around the inherited property, it shows the world that the inheritance is not the beneficiary’s property to do with as they please. Instead, only the trustee can reach inside the box and, based on your specific instructions, pull funds out for the benefit of the beneficiary. Creditors, predators, and divorcing spouses are generally blocked from reaching inside the box and taking property out.
 
When the beneficiary dies, what is left inside their box will pass to the heirs you choose. You could decide, for example, to have the assets pass to your grandchildren inside their own separate boxes and on down the line, thereby creating a cascading series of discretionary lifetime trusts that will protect the inherited property and keep it in your family for decades to come.

If you have questions about using discretionary trusts to protect adult beneficiaries, please contact my office.

Unlike a will, a trust does not have to die with you.
 
Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age(s) at which you want them to inherit.
 
Your trust can continue to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, spouses, and future death taxes.
 
If you have questions about your Living Trust, please contact my office.