One Last Gift Just After the Holidays…Give Your Child the Gift of Asset Protection for Life.

How would you like to be able to pass on your hard-earned wealth to your kid(s) free from attack by creditors and predators? Wouldn't it be great to know that the legacy you are leaving behind to your kids, grandkids, or other loved ones will be protected?

Today, I am going to tell you about an asset protection strategy that will allow you to give your loved ones what you want without having to worry about how long they will be able to keep it.

First, let's examine the facts. Regardless of how responsible your kids are or how well you raise them, you can't control what happens to them or what others try to do to them as they navigate through life. Some of the perils that could affect their inheritance include:

  • a business deal gone bad
  • a creditor attempting to raid their inheritance
  • a lawsuit filed against them, or
  • themselves (even responsible kids sometimes make bad decisions)

So what can you do? How can you help prevent the loss of their inheritance due to one of these circumstances?

Solution: Consider wrapping their inheritance in a discretionary/spendthrift trust.

How it works: In a discretionary trust, the trustee has the right to accumulate or withhold income from a beneficiary (See Conn. Gen. Stat. Section 52-321(a)). Thus, distributions are subject to the trustee's "discretion." In Connecticut, if the trustee has this absolute right and is not required to make distributions outside of their discretion, the income is generally exempt from creditors' claims. Therefore, your child's trust should give the trustee this discretionary power to achieve this level of protection.  

Note: These trusts must be structured and drafted carefully to help ensure that your objectives are met. Furthermore, the success of any asset protection strategy will depend largely on your individual circumstances. You should discuss any asset protection or estate planning strategy in depth with a skilled attorney before making any decisions.

Reach out to a CT Estate Planning Attorney to discuss how a discretionary trust fits into your wealth transfer strategy.