What is a Lifetime Beneficiary Protection Trust and is it Right for You?

Typically, when your loved one sets up a trust and you are the beneficiary of that trust, you will mourn the loss of that loved one when the time comes and then you will receive a call from the Trustee of that trust notifying you that you are to receive an inheritance of a certain amount. That Trustee will simply write you a check after all the assets are liquidated, and you will deposit it in your bank account. Is this the best way to receive an inheritance though?

Is there a Better Way?

Your loved one could have left the assets for you in a Lifetime Beneficiary Protection Trust. These trusts are designed to protect your inheritance. Many events happen over the course of someone’s lifetime that can wreak financial havoc. These events can include: divorce, lawsuit, and bankruptcy. A Lifetime Beneficiary Protection Trust can protect loved ones from these types of events.

If you receive an inheritance by the Trustee simply cutting a check to you personally, these assets are completely susceptible to both lawsuits and bankruptcies. If you deposit that check, at least here in California (where we have community property laws), into your joint account with your spouse, those assets may also be susceptible to divorce as well.

If you have a Lifetime Beneficiary Protection Trust, your trustee will create an account that has its own tax ID number, apart from your social security number. The funds will be deposited into the account. Depending on the way the trust was initially set up, you may become the trustee of this trust to administer over it in a way that complies with the terms of the trust. The terms can be as rigid or liberal as your loved one wished.

How do I Get One?

This is the catch. Under the laws of most states, including (maybe even especially) California law, you cannot create a trust like this for yourself. This is considered a “self-settled Trust” and can result in financial and even legal ramifications for using a trust like this to avoid possible suit. There are asset protection trusts in some states, but they are much more difficult to create than a Lifetime Beneficiary Protection Trust.

Because you cannot create them yourself, you must rely on your loved one to create this type of trust on your behalf. Also, you can think about the next generation and create a trust like this for your loved ones.

You or your loved ones can call us at (951) 516-2292 to see if this type of trust is right for you.