Generally, the assets that are held in a trust are not protected from the grantor’s creditors, but are protected from the creditors of the beneficiaries’, at least until the beneficiary receives the distribution from the trust.
However, the assets in a domestic asset protection trust are protected in exchange for some loss of control over those assets, and provided that the trust is established in the proper manner.
Most people choose to have revocable and amendable trusts in which their assets are not protected from creditors, but there are certain measures that can be taken in order to protect them from creditors. One such measure would be to require the drafting of certain clauses whereby the distributions from the trustee would be solely up to the discretion of the trustee and not given to the beneficiary at any particular time or in any particular manner. These are known as solely discretionary trusts.
Unlike a trust, a will does not take effect until after a person has passed, which means it will not deal with any assets while the person is alive. However, the assets that are funded into a trust could be controlled by the trustee of the grantor’s choice should the grantor become disabled.
In and of itself, having a will does not allow for the probate process to be avoided, whereas having a fully and properly funded trust does avoid probate, at least to the extent of those trust assets.
When creating a trust, the typical practice is to create a pour-over will at the same time as a trust, which acts as a safety net of sorts for the estate. In other words, if something were to have been left out of the trust or a previously unknown asset were to be discovered, the pour-over will would dictate that everything be left to the trust.
There are positive and negative aspects of both wills and trusts, and, ultimately, which one is best will depend upon the client’s needs and desires.
It is generally pretty simple to deal with assets that change after a trust has been created. Any time someone acquires a new asset or makes changes to an old asset, they should ensure that the trust is designated as owner or a co-owner or beneficiary of that asset, so that it passes to the trust, upon death.
A trust allows for the probate process to be avoided because it is considered a legal entity in and of itself, and like any legal entity, it does not die along with the person who created and managed it. It is helpful to compare it to a corporation; a corporation is owned by its shareholders, but when the shareholders die, the corporation remains. Similarly, when the settlors or the grantors of a trust die, their trust remains and will be handled by the successor trustee named in the trust.
Choosing a trustee is a highly personal decision, but some general principles and considerations apply.
The person chosen should be willing and able to act as trustee in the event that the grantor becomes disabled or passes away. So they should be nearby, ideally, and a competent adult.
And they should be financially responsible in handling their own affairs. This will assure you that they are more likely to be responsible in handling your affairs.
When someone does not have a family member or individual whom they are comfortable selecting, there are options. Financial institutions that have trust departments are often willing to act as trustees. However, some of these financial institutions require a minimum trust value of between three and five million dollars and not everyone has that amount of money. In addition, they will charge a fee that is most likely higher than a family member or friend would charge.
For more information on Assets Protected From Creditors In A Trust, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (248) 869-0030 today.