Creditors, predators and lawsuits – OH MY!
Do you have the kind of protection that gives you peace of mind?
Over the last two decades, asset protection planning has become a crucial aspect of most estate planning. The creative use of irrevocable trusts can be one of the most powerful tools in estate planning and asset protection plans.
Missouri Asset Protection Trusts provide the state’s residents with some great options, not offered in all other states.
Asset protection for the average Joe
Don’t make the mistake of assuming that asset protection planning is only for high net worth individuals. Even “average net worth” people can benefit from a discussion with their estate planning attorney. It is true, however, that asset protection planning should be a higher priority for individuals whose jobs subject them to more creditor claims. Examples are doctors, lawyers, real estate investors, and small business owners.
What makes Missouri different?
Here’s the general rule in most states; If the individual creating the trust is a beneficiary of that trust, then the creditor can reach the maximum amount of property to which that individual is entitled. Many classic Revocable Living Trusts provide that an individual is entitled to all distributions of income and principal, and hence provide no asset protection. In case you missed it, that’s a bad thing. Missouri, however, is one of a handful of states that have altered the normal rule to allow expanded asset protection planning for individuals when using an special type of irrevocable trust.
A Missouri Asset Protection Trust is an irrevocable trust that allows an individual to transfer their assets into the trust, retain the ability to be a beneficiary of the trust and also retain certain powers and controls over the trust. They also have protection from future creditors and bankruptcies.
Which option is right for you?
In addition to the classic Missouri Asset Protection Trust described above, there are several other irrevocable trust options which may make sense depending on the individual’s goals, their need for control over the trust, and type of property being held in the trust. Some of these options allow the individual to retain complete control over the property in the trust. Other options give the majority of the control to others (generally family members). Have a thorough discussion with a qualified asset protection attorney, reviewing all of the options available to you and cover all your bases.
Special family considerations
If you want asset protection for your family members and future generations, consider the creation of a trust that provides specific protection for those individuals. If a family member has special needs that will require maintaining government benefits throughout his or her life, then a special needs trust will be an important option to consider.
Be sure to include a “spendthrift provision.” A spendthrift provision restricts a family member from using the assets to which he or she is entitled for satisfying creditor claims, either voluntarily or involuntarily. If drafted correctly, the trust can provide protection from many other unforeseen events, such as future bankruptcy and divorce.
Special needs trusts
A special needs trust is a type of trust that maintains an individual’s eligibility for certain government programs, such as Medicaid and Supplemental Security Income (SSI). These trust must be carefully drafted so as to withstand the scrutiny of these government entities. It is important to ensure that these trust only “supplement” and not “supplant” those benefits.
Planning ahead is crucial
Asset protection strategies such as those outlined above require planning before creditor issues arise. Missouri law allows creditors to satisfy claims from assets that are transferred to an asset protection vehicle while known claims are pending. If protection from creditors, predators, lawsuits and bankruptcy is important to you, act now before it’s too late.
Written by Brian G. Quinn, Attorney with Quinn Estate & Elder Law