California Estate Attorneys Giving You the Representation You Need for Asset Protection Trusts

Whether they children, grandchildren, other family members, or trusted friends, we all want to ensure our heirs are provided for. No one wants their loved ones responsible for bills and obligations after they’re gone. We all want those closest to us left with happy memories and potentially items to remember us by and resources to live their best lives.

Many people will struggle with financial obligations as they age. This is especially true for older individuals who may have incurred several medical bills or other financial obligations. Several individuals may worry their loved ones will be left fending off creditors or other debt collectors. This is why an asset protection trust (APT) may be vital to leaving behind money and other valuables to your loved ones. An APT can shield certain assets from creditors and allow you to leave behind the maximum amount of resources for your family and loved ones.

What Can Creditors Come After in California?

In California, heirs cannot inherit other peoples’ debts. However, if someone passes away and owes money to creditors, those creditors can make specific claims on some money and property the debtor left behind. In California, creditors can attempt to collect:

• Community Property
• Joint Accounts

California is a community property state. This means any assets owned by one spouse during the course of a marriage are considered to be the property of the other spouse as well. This includes debt. This means a person can be responsible for paying off a deceased spouse’s debt out of their financial resources.

Creditors can also pursue individuals who had joint accounts with the deceased. This not only includes bank accounts but anything for which the deceased cosigned, including car loans and other forms of joint debt. If someone cosigned with the deceased on any financial documents, they could find themselves financially responsible for paying the deceased’s debts.

When someone passes away in California, their creditors must be informed by their heirs. Usually, this is the responsibility of the executor of the will. Once the creditors have been informed, they will generally have a year to file claims on and collect debt. In California, debts must be paid off in a specific order. Probate law prioritizes specific financial responsibilities over others. The general order an estate’s debts must be paid in is:

• Debts to the State of California and the U.S. Government
• Administrative Expenses
• Secured Debt (Mortgages, Loans Secured by Liens, etc.)
• Funeral Expenses
• Medical Bills
• Family Obligations
• Unpaid Wages to Employees Up to $2,000
• Credit Cards

Assets left over after these obligations have been paid can then be distributed accordingly. For those individuals concerned that their debts may outweigh their financial obligations, an Asset Protection Trust (APT) may be the perfect means of ensuring their heirs are still able to inherit.

What is an Asset Protection Trust in California?

An asset protection trust (APT) is meant to protect an individual’s assets from creditors once they are gone. With an APT, an individual legally transfers ownership of certain assets to another person while they are still alive. This person is referred to as the trustee. Because the trustee has become the legal owner of these assets, they are no longer considered the financial responsibility of the original owner (guarantor). This means they cannot be pursued or seized by creditors after death. Once the guarantor passes away, the trustee will distribute the assets according to the guarantor’s wishes.

It’s important to note that an APT is an irrevocable trust. This means that once the guarantor executes the trust, they cannot revoke its terms. Once resources are transferred into the trust, they cannot be transferred back out.

There are several types of APTs available. An attorney will be able to best outline which is right for a given individual. Some types of APTs include:

• Domestic APTs
• Medicaid APTs
• Offshore APTs

Domestic APTs are set up in the individual’s state of residency. However, most domestic APTs have exceptions that allow for collection from debtors in certain circumstances, such as to pay back child support or alimony.

Medicaid APTs are a special type of APT established to protect assets from being counted against Medicaid eligibility criteria. These are particularly valuable for individuals in extended care facilities such as retirement homes, nursing homes, or those receiving at-home care.

Offshore APTs are also known as Foreign APTs. These are APTs established in countries with stricter privacy laws and lower tax rates. This can be advantageous in providing the most for heirs.

It’s also important to consider that APTs can be complex and expensive to establish. This is especially true for foreign APTs. An essential consideration in creating an APT is whether the cost of establishing it will outweigh potential expenses to creditors. Paying off creditors is sometimes less expensive than setting up an APT. This is why consulting with an experienced attorney before estate planning is essential. A lawyer will be able to help you best determine if an APT is right for protecting your assets and leaving your heirs the maximum amount.

What Should I Do if I’m Considering an Asset Protection Trust in California?

Asset protection trusts can be perfect for ensuring you can pass on the most to your family and loved ones. They can also help prevent them from having to handle your debts and creditors after you’re gone. APTs can be complex and require special legal care and consideration to meet all legal parameters. This is why if you’re considering setting up an APT, you must consult an experienced attorney.

If you or a loved one are considering setting up an APT, don’t hesitate to contact Celaya Law, located at 1455 1st St #216, Napa, CA 94559. The attorneys of Celaya Law are experienced in all forms of estate planning. They work with each client to determine the best course of action for them. They can help determine if an APT is right for you and, if so, what type will best benefit you, your family, and loved ones. The attorneys of Celaya Law aren’t satisfied until they’re confident their clients and their families will be well taken care of for years to come.

Planning for the future can be intimidating. With the lawyers of Celaya Law, it doesn’t have to be. If you or a loved one are planning an estate and wondering if an asset protection trust is right for you, don’t hesitate to call Celaya Law at 707-754-0977 or email them for a free consultation.