A trust is often created to protect assets from the costs of long-term care. We are often asked why it is not advisable to simply give assets to a family member instead. The reason we advise against is this is because no one is protected from the four D’s of life: divorce, debt, disability and death. No one wants to think that these things can happen to their loved ones, but they do. And when they do, they can cause a family to lose significant assets.
For example, let’s say that you transfer your assets, such as a home, to your adult child. If your child gets divorced, your home becomes an asset to be liquidated in a divorce proceeding. Likewise, debtors could put a lean on your home should your child fall on hard times financially. Even if the child is single and debt free, but become disabled in an accident, or have someone sue after an accident, putting the home at risk.
A trust can be written to include provisions that prevent a beneficiary’s creditors from reaching the assets in the trust before it is disbursed. A revocable trust allows you to change the beneficiaries should a life event make it a risk, like the examples above. In short, a trust is a safety net to ensure your assets are well protected, despite the four D’s of estate planning.
