Most living trust beneficiaries receive their inheritance “outright,” meaning it is distributed from the trust directly to them, so that they effectively own the inherited assets. Unfortunately, by “owning” their inheritance, your beneficiaries are then needlessly exposed to the claims of spouses in divorce, creditors, lawsuits, the loss of government needs-based benefits and potential estate taxes when their inheritance is handed down to the next generation of beneficiaries.

Instead of receiving their inheritance directly, each of your beneficiaries may instead receive their inheritance in a special trust, which springs out of your living trust. This continuing “Personal Asset Trust” (or “PAT”) can be controlled by each beneficiary in such a manner as to virtually give him or her all of the same rights as ownership, without the liability exposures ownership brings.

With the Personal Asset Trust, each beneficiary has the option to be his or her own initial Trustee and be in charge of his or her own Personal Asset Trust. The beneficiary may control the investing of his or her inheritance, how and when it is distributed and even who may receive it when that beneficiary passes away. One of the major benefits of the Personal Asset Trust is its adaptability, in that the level of asset protection needed may be determined by looking at the beneficiary’s circumstances at the time of inheritance, with the benefit of 20/20 hindsight. For example, if a moderate or more advanced level of protection is necessary, an independent Co-Trustee or Trust Protector may be brought in to co-sign on transactions or temporarily lock down the trust from outside parties. In either case, the beneficiary may continue to indirectly control his or her inheritance, while enjoying additional asset protection.

Secure Your Legacy: How a Personal Asset Trust Protects Your Beneficiaries

When planning your estate, protecting your beneficiaries’ inheritance is crucial. Most living trust beneficiaries receive their inheritance “outright,” meaning assets are distributed directly to them. While this approach seems straightforward, it leaves the inheritance vulnerable to significant risks. These include exposure to claims from spouses during divorce, creditors, lawsuits, loss of government needs-based benefits, and potential estate taxes when the assets pass to the next generation.

To address these vulnerabilities, a Personal Asset Trust (PAT) offers an innovative solution. Instead of receiving their inheritance outright, beneficiaries can inherit their assets through a PAT. This specialized trust, created as part of your living trust, provides beneficiaries with nearly all the benefits of ownership while safeguarding their inheritance against unnecessary risks.

How Does a Personal Asset Trust Work?

A PAT allows each beneficiary to act as their own Trustee, giving them control over their inheritance. They can make key decisions, including managing investments, determining how and when distributions are made, and deciding who will receive the remaining assets after their passing.

The flexibility of a PAT ensures that protection can be tailored to the beneficiary’s circumstances at the time of inheritance. For example, if a higher level of protection is required, an independent Co-Trustee or Trust Protector can be introduced. This individual can co-sign transactions or secure the trust from external claims, while the beneficiary retains indirect control over their assets.

Why Choose a Personal Asset Trust?

A Personal Asset Trust goes beyond the basics of inheritance planning by offering:

Protection from Liability: Assets within a PAT are shielded from divorce claims, creditors, and lawsuits.
Preservation of Government Benefits: Beneficiaries reliant on needs-based benefits can maintain eligibility without jeopardizing their inheritance.
Tax Advantages: A PAT ensures estate taxes are minimized, and assets pass efficiently to the next generation.
Flexibility and Control: Beneficiaries maintain autonomy over their inheritance while benefiting from asset protection tailored to their needs.

Whether your goal is to preserve wealth, provide financial security, or safeguard assets from unforeseen circumstances, a Personal Asset Trust can be a vital component of your estate plan.

Secure Your Legacy Today

If you want to learn more about how a Personal Asset Trust can offer unparalleled protection for your beneficiaries, contact our office for a free consultation. Our attorneys can help you understand how this strategy can secure your assets, protect your loved ones, and provide peace of mind.

Allyson S. Heller is a licensed attorney at the Law Offices of Tony J. Tyre, Esq., APC. For more information, please contact us at (626) 858-9378 or email aheller@tyrelawgroup.com.