A common question we receive about trusts is about asset protection. People are curious about trusts. Among those people, some are extremely curious about using trusts to protect assets. They want to know if it is possible. Yes, you can use a trust to protect assets from creditors, Medicaid, divorce, and bankruptcy.
It’s obvious why this would be a major concern for some people. You’ve worked hard for your wealth. You don’t want to lose it to the government or someone who doesn’t deserve it. No one wants to be the victim of theft. And losing an asset in one of these circumstances sure feels like getting mugged. It happens against your will, and you don’t have time to stop it.
This series of articles will discuss different ways to use trusts for asset protection in Oklahoma. We will explore how to use trusts to protect assets. Next, we will look at specific situations. For example, can a trust protect assets from Medicaid? Keep reading to find out how this all works.
What assets are we protecting and who are we protecting them for in our trust?
When you set up a trust to protect assets, you must first identify who you are protecting. There is a difference in protect assets for yourself and protecting assets for someone else. This is a fundamental concept and one you must think about when setting up an asset protection trust.
For instance, if you want to give assets to a child or grandchild, there are multiple ways to do that. One way is to create a trust inside your current revocable living trust. You can actually pass assets through your own living trust in a way that offers asset protection to your child or grandchild. This is a service we offer all clients when they hire us to draft regular living trusts. To set this up, we simply create a living trust for you but add a provision that transforms into an asset protection trust when you die. That way, when your children inherit the assets, they remain inside a trust for asset protection purposes.
Now, what if you want to protect your assets right now, from creditors for your own benefit? In this scenario you want the protection for yourself, not for someone else like your children. This is a completely different scenario that requires different trust planning. This is why we always start out asking the question of who are we trying to protect.
Setting up a trust for asset protection involves giving up control
To understand how an asset protection trust works, first, know how a traditional living trust functions. We covered this topic in our last series. We explained the roles of Grantor, Trustee, and Beneficiary. We will review those concepts here.
A trust is set up by a Grantor. The Grantor gives a Trustee the power to hold the assets. It is very common for the Grantor to also serve as Trustee, at least during the working years of a Grantor’s life. This is what we call a revocable living trust. The Grantor can revoke or change it at any time. And by serving as the initial Trustee, the Grantor also retains the power over all of the trust’s assets.
Since the Grantor controls the assets, creditors can access them. Anyone looking to garnish or collect from the Grantor’s assets can also do so from the Trust’s assets. And the reason is because the Grantor is still in control of the trust assets when he is serving as trustee.
To shield a trust’s assets from the Grantor’s creditors, we need to do two things. First, we must give up the right to revoke or change the trust. Second, we need to give up control as Trustee to a third party. Removing your control over the trust’s terms and appointing someone else to manage the assets can protect them.
Who should you choose to be trustee to control your assets?
You need trusted advisors to design asset protection for your estate. These people can be private individuals or corporate trustees that work for trust companies. You could even appoint your attorney, accountant, CPA or financial adviser. As you prepare for your consultation, think about who your trusted advisors will be.
How to set up a trust to maximize asset protection in Oklahoma
Protecting your assets is a worthwhile, even noble goal. While the media might demonize these completely legal techniques, you know what is best for your family and your estate. There is no need to apologize for wanting to protect want you’ve earned.
To maximize asset protection, book a consultation with our Trust Attorney in Oklahoma City. Our service typically involves an intake process, an in-person consultation, and a design meeting. We typically combine the consultation and design meeting for efficiency and economy of time. But this is up to the client.
Thereafter, we schedule a signing ceremony, and then we go to work in funding the trust with the assets that will be protected. Once the trust is funded, we set up our final meeting to deliver the completed documents and instruments. From there, we are available as you need us, whether for updates, changes, or even decanting procedures.
To get started, send us an email, or call 405-607-7799. From there, we will schedule a 15-minute call with our trust attorney and we will work out the details of scheduling your consultation.
Read our next article in this series about setting up asset protection for the elderly in Oklahoma.