No, you should not do a self-settled asset protection trust in Massachusetts
Trusts generally fall into two categories: revocable trusts - meaning trusts that you can alter/amend/change and have control over - and then there are irrevocable trusts that you generally can NOT alter or change once created (apart from decanting, which is outside the scope of this article). Those two letters in IRrevocable can make all the difference in matters relating to asset protection.
So why shouldn’t I do a self-settled asset protection trust in Massachusetts?
You are not fully protected if you are the beneficiary of your own trust in Massachusetts. In other words, you need to be careful when describing who can benefit from an irrevocable trust. When you create a trust for the benefit of someone else, then it is known as a third-party trust and those typically work great as a spendthrift trust for children because they protect the assets from creditors that would could go after your beneficiary’s assets (for example, a child going through a lawsuit, filing for bankruptcy, or getting divorced). However, when you create a trust for the benefit of yourself (even if you only give yourself a small benefit) it is generally considered a self-settled trust. In Massachusetts, any property that you could receive from a trust that you created can be subject to creditor claims.
Then how should I use an irrevocable trust to protect my hard-earned assets?
Irrevocable trusts generally work best for assets or property that you no longer need to own or have control over, but want to protect from your children's potential creditors. In other words, stuff you can afford to live without. If you are comfortable giving up all the rights of your property for the benefit of your children, but are uncomfortable with your children receiving the property outright from an asset protection standpoint, then an irrevocable trust may make sense for you. However, if your lifestyle is dependent upon that property or money - don’t do it.
Nothing is worse than having to ask your child for money.
Still not sure whether an irrevocable trust may make sense for you? Give me a call at 781 202 6368 or email me at JLento@PerennialTrust.com to schedule your free personal consultation.
I’m always happy to help,
Joseph M. Lento, J.D.
Your Local Estate Planning Attorney
Perennial Estate Planning
477 Main Street
Stoneham, MA 02180
