What Are Some Reasons People with a Net Worth of Less
Than $2,000,000 Explore Asset Protection Trusts?
People commonly set up an irrevocable asset protection trust and voluntarily give up “direct” control as well as (sometimes) the benefit of assets to achieve certain long term care public benefit goals. How does this protection work? Well, an irrevocable trust can be established by you, where you give up the control and the benefit of certain assets that you transfer to your irrevocable trust. This can be prudent planning to implement to preserve a person's lifestyle and stave off bankruptcy — for example, for a person with disabilities who receives government benefits. Most commonly for elders, these irrevocable trusts are set up to obtain Medi-Cal and/or Veterans’ Aid and Attendance Pension Benefits in order to help seniors pay for their long term care expenses. In these cases, people voluntarily "give up" asset(s), so it is out of their state “estate” and is therefore not countable by the government for purposes of obtaining important government benefits, but these assets are not “given up” for federal tax law purposes, so people can retain positive capital gain tax benefits.
For people who are looking for asset protection in the traditional sense, there's much more to discuss. Unfortunately, those with a net worth between $1 million and $10 million have a target on their back, especially in California. Generally speaking, those with less than one million dollars in assets are usually not worth the time and effort of a lawyer to pursue in a lawsuit (especially since their target (i.e., you) can theoretically reorganize your estate in a bankruptcy proceeding, thereby rendering the original lawsuit impotent). Similarly, those with over $10 million dollars in assets typically do not make great targets for (unscrupulous) attorneys and their clients because these litigants can afford to, and often do, fight back. However, in our experience, there is a sweet spot where lawyers “find people who have been wronged” (supposedly) to go after other innocent individuals who have worked hard to accumulate a certain degree of wealth, but who are not super wealthy. We have found that these “mom and pop” millionaires are great targets for litigious bad actors and the lawyers who represent them. What we call “mom and pop” millionaires are easy to intimidate, very compliant, hate to litigate, don't want to spend years of their lives and tons of money defending themselves, etc. At the end of the day, these innocent individuals usually cave into unfounded claims and settle these bogus lawsuits for a large sum of their net worth. They rationalize that it is better than the uncertainty of a continued lawsuit and they are tired of being stressed out and losing sleep over the matter. So, these amoral litigants and their lawyers win, warping the legal process, often leaving these unfortunate mom and pop millionaires shell-shocked forever.
We find this all incredibly disgusting, disturbing, and wrong. Typically people don't think about these perilous situations unless and until they find themselves in them. Even then, most people are not really too concerned about the outcome because they think the legal system will ultimately provide them with the justice they deserve. But amazingly, most of the time, they are wrong about the legal system providing justice. That is why, in certain circumstances we help people set up domestic and foreign asset protection trusts which help ensure that hard earned assets are not lost to unscrupulous individuals and lawsuits.
In summary, to protect your legacy, you will need an attorney who is well versed in the area of asset protection trusts and creditor protection law. At Kaiden Elder Law Group, PC, we pride ourselves on being leaders in the asset protection trust arena. Besides keeping up with the law, we routinely set up asset protection trusts that preserve the financial future of elders who can, with proper planning, qualify for Medi-Cal and Veterans’ Pension Benefits. For the benefit of children with special needs, we also set up special needs trusts and counsel trustees as well as trust protectors on how to navigate the financial, tax, and Social Security disability complexities that always arise with such trusts. When our clients have blended families, we regularly create litigation avoidance trusts, IRA retirement trusts, etc., which help prevent your assets from ending up in the “wrong hands” or from being wasted by children's divorcing spouses, disgruntled business partners, foreclosures, bankruptcies, and even kids’ own bad spending habits. Finally, for the ultimate in asset protection, we help clients establish domestic and foreign asset protection trusts to help prevent litigious bad actors from taking advantage of them.
If you are interested in discussing asset protection trusts, please contact us for an initial consultation.