How to Use a Trust for Asset Protection

People of all ages and backgrounds worry about asset protection. Creating a trust is a great method of protecting your personal assets from harm. You will need to examine your assets and situation carefully when deciding what type of trust you will use.

• Think about the type of protection that you need. The type of trust that you create will vary based on the type of protection that is required. Most commonly, people find it necessary to protect their assets from lawsuits or divorce. In other situations, a person must protect their assets from situations such as Medicare spend-down provisions in the event that a person is moving into a nursing home.


• If you are facing a potential lawsuit and need to protect your estate or assets, you will need to create an irrevocable trust. Neither you nor your spouse will be listed as a beneficiary on this trust, and you must relinquish all control of your estate.


• An irrevocable trust can also be an effective way to protect your assets from creditors and estate taxes, both while you are living and after your death.


• Protect your assets from divorce by creating an international trust. You must incite the duress clause in order to protect your estate. This is a rather complicated process. Your trust must have an international trustee. In some cases, a U.S. court will attempt to forcibly terminate the international trustee's control. The duress clause allows the international trustee to refuse to relinquish his control without legal recourse, which maintains the protection of your assets.


• As you age, a trust can protect your estate from Medicare spend-down. Medicare requires that 100 percent of a person's marital assets be spent to pay for nursing care before a person can be eligible for Medicare payments. Creating an irrevocable trust with an independent trustee can protect your assets from Medicare. Both spouses can be named as trustees on the irrevocable trust.