Asset protection is nothing new. At its core, it’s simply a financial tool designed to structurally protect your wealth and your heirs after your death. Many use living trusts s a way of protecting their assets from any number of entities, including creditors. Naturally, it’s not without its controversies. Nevertheless, for estate planning efforts, a properly implemented asset protection plan can provide peace of mind. Provided it’s done ethically and with no efforts of hiding assets with no thought of the legal repercussions, it more than serves its purpose.
Asset Protection
Keep in mind, asset protection should never be used to avoid alimony, child support and other legitimate financial obligations. Trying to accomplish this is anything but ethical. It most often backfires, too. Remember that each state has its own laws when it comes to asset protection efforts. New Hampshire is one of the few states that have enacted a statute that allows a party to settle a Domestic Asset Protection Trust. Do you need asset protection?
Living trusts serve an important function in estate planning efforts. They’re versatile and are used for a number of reasons. Is a living trust right for your own estate planning needs? Here’s a breakdown of a few of those many benefits. Contacting an estate planning lawyer is always your best first step of ensuring your future – and the futures of your loved ones – is protected.
Avoiding Probate
Probate is nearly always costly – both from a time management and financial sense – and many form living trusts in order to bypass probate and the expense that’s always associated with the process.
Privacy
Another important reason one might choose to incorporate a living trust is its ability to keep his family’s privacy intact – especially considering many living trusts now include what’s referred to as a “spendthrift clause”. This is simply a dynamic that limits or altogether prevents a beneficiary from being able to transfer or otherwise reassign his interest in the trust. They’re most often used when a beneficiary is unable to make financial decisions for himself. It might be an heir who doesn’t have the capacity to do so because of a mental illness or it could be someone who’s lost his or her way due to drug abuse. The spendthrift clause protects the heir who is unable to do so for himself or herself. Interestingly enough, nearly every living trust has a spendthrift clause these days.
Tax Savings
When a married couple establishes a living trust, they enjoy twice the estate tax savings. At the death of one partner, it passes in its entirety to the spouse and at the death of the second spouse, it then paves the way for the heirs to take advantage of the tax expemption. At the death of the first spouse, two trusts are created – one for the deceased spouse and one for the surviving spouse; the surviving spouse will still be able to access both. In Massachusetts, if the combined value of your home, life insurance death benefits, retirement plans and other assets exceed $1million, your estate will be heavily taxed without the protection of a trust.
The Health Care Considerations
Most living trusts include a living will, of sorts, that’s built in. This way, both parties are able to provide their wishes for health care should it ever become necessary. It’s important to note, however, that there are sometimes mandatory requirements for disbursing the trust to the adult children, when applicable. This means if one of those kids is going through a divorce or is struggling with financial problems, a creditor can sue and win those funds. There are ways your estate planning lawyer can help protect against those types of potential problems.
Again, your best weapon is establishing a relationship with an estate planning attorney you trust.
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