Today I\u2019m going to be going over a short tip which you can use to protect your inheritance. It\u2019s a very powerful tool. This tip turns a lousy estate planning trust into the equivalent of a $25,000 domestic asset protection trust<\/b>.<\/p>
All you have to do is have the courage to bug your parents about your inheritance. Let me explain it to you, this is a typical estate planning trust. Note, we\u2019ve got this blue and red thing down here, that\u2019s trust. It\u2019s loaded up with money; the money sign just means it has assets that you\u2019re going to inherit from your parents.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
This is the type of trust that most people with any significant wealth will almost always do. Why, because it avoids probate. This is a revocable trust, it allows sophisticated tax planning but in most cases it has no asset protection benefits at all.<\/p>\n
Normally the players in this are the settlor. That will be your mom and dad, usually and it can be somebody else but for this example I\u2019m assuming your mom and dad are leaving you some money.<\/p>\n
The trustee is also your mom and dad. It\u2019s in the United States, its not protected, it\u2019s easy for creditors of your mom and dad to get to. Down here is the beneficiary. This little blue guy is the beneficiary; this blue guy is you. The red guys are your mom and dad. For the purposes of this example that is very, very important.<\/p>\n
Well let\u2019s talk about it. This trust allows your mom and dad to save some taxes, it allows you to get their stuff. It allows you to get their stuff without going through a probate; nobody knows what you got. It\u2019s a very wonderful tool but most estate planners just assume it has zero asset protection benefits. Let me explain why. There are two reasons why domestic revocable living trusts are nearly worthless for asset protection purposes. The first of these reasons is the self-settled trust rules. Well what are the self-settled trust rules? The self-settled rules mean that the granters of the self-settled asset protection trust cannot take advantage of the spend thrift provisions<\/a> that are in almost all of those trusts.<\/p>\n The spendthrift provisions<\/a> in each of those trusts are valid in all fifty states and what those spend thrift provisions do; there is several videos on this and there are several links below. But those provisions keep creditors of a beneficiary from forcing the trust disgorge assets.<\/p>\n I once had a situation in San Diego where a young man was the beneficiary of a very, very substantial trust. Many millions of dollars his dad had just died and he\u2019s a very wealthy man. He\u2019s going to receive some very substantial distributions from his trust.<\/p>\n He went down to the local Ferrari dealer and talks this sales person into giving him a car on a promise that he was going to buy it and that the trust was going to pay for it and he proved the assets in the trust and he proved that he could pay for it.<\/p>\n So they gave him the car. Well the trustee said no way am I spending my brother\u2019s money to give you a four-hundred and some thousand dollar car. No way! The Ferrari dealer had to take it back, he could not force the trust to pay for this car that the beneficiary so ill advisedly purchased.<\/p>\n The self-settled trust rules only apply when you did not settle the trust. If you did settle the trust they are worthless.<\/p>\n That is why domestic asset protection is nearly always unreliable in the United States. The self-settled trust rules specifically state, in every state, except for the ones that had recently in acted self-settled trust action regulations that the creditors of a beneficiary of that trust cannot grab the trust assets. That\u2019s the first one.<\/p>\n Second one, the full faith and credit clause of the constitution. This clause provides that all fifty states can enforce their judgments in all other states. All you have to do is reregister a judgment, you do not have to litigate it, and the states that have in acted domestic asset protection legislation forget the full faith and credit clause.<\/p>\n They pretend that it doesn\u2019t exist, that\u2019s why they\u2019re all wrong and the domestic asset protection<\/a> funds are absolutely malpractice to do right now because they\u2019ve never been tested and if the US constitution trumps domestic state law; which it always does, then those domestic asset protection trust law are irrelevant. Watch my videos on that.<\/p>\n