The main purpose of a trust is to protect your assets to pass on to the next generation. However, in the event that you have certain debts, it is important to be aware that a trust will not necessarily protect those assets from creditors. For example, if you or your beneficiaries file for bankruptcy, the trust could be seized as repayment of debts. Continue reading below to learn more about what can be done in these situations and contact an experienced California estate planning attorney for assistance.
What is the Difference Between a Revocable and Irrevocable Trust?
When discussing if the grantor or beneficiaries of a trust have debt, it is important to understand the differences between a revocable trust and an irrevocable trust. If a revocable trust is created, the grantor has control of the trust until they die. This means the assets in the trust are legally considered their property during their lifetime, and beneficiaries will assume ownership when they pass away.
On the other hand, the grantor is not in control of an irrevocable trust. Although beneficiaries do not necessarily have access to the assets as soon as it is created, they are legally considered the owners. It is possible to add a “spendthrift” provision to this type of trust that could protect it from credit seizure if a beneficiary files for bankruptcy. Sometimes, a trust may also be eligible to be exempt from seizure during bankruptcy.
What are the Benefits of a Trust?
There are a variety of reasons as to why a person may choose a revocable or irrevocable trust. It is important to choose a trust that is right for what you are trying to accomplish fro your estate. Some of the benefits of an irrevocable trust can include:
- Estate tax reduction
- Asset protection
- Charitable estate planning
Alternatively, some of the benefits of having a revocable trust can include the following:
- Planning for mental disability
- Avoiding probate
- Protecting privacy
Contact our Firm
Working with an experienced estate planning attorney, such as Jaci Feldman of the Woodland Hills, California, Law Office of Yacoba Ann Feldman, will ensure that you are taken care of when you need it most. Do not delay. Estate planning is a more urgent matter than you may think. You never know what the future holds. Contact The Law Offices of Yacoba Ann Feldman to schedule a consultation today.