Families in Pennsylvania interested in segregating their children’s inheritance from marital assets should the heirs get married sometimes use trusts to hold the assets. A trust can be set up that names the heir as trustee. This grants the heir some control and access to the assets while keeping asset ownership within the trust. Naming a trust protector within the trust documents adds another level of asset protection. A trust protector serves as an alternative trustee should threats arise to the funds, such as a divorce or lawsuit.
A protector might be a sibling or another trusted person. When control switches to the protector, it places the trust’s assets outside the purview of a lawsuit against the heir who had originally served as trustee. Only threats to the assets activate the powers of a trust protector.
The use of a trust protector could dovetail with other wealth preservation goals within an estate plan. The owners of large estates with asset levels above the estate tax exemption sometimes turn to various forms of asset protection trusts. A spousal lifetime access trust, for example, could shift assets outside of the taxable estate while still ensuring the spouses have access and control of funds. Similarly, a dynasty trust shields family members from technical ownership of assets while granting them control. Such a trust could spare an estate from paying taxes for generations while assets continue to grow.
Estate taxes can rise and fall as years go by, and a person could discuss with an attorney methods for protecting wealth regardless of taxation levels. After evaluating a client’s financial situation and goals, an attorney may suggest estate planning strategies that protect privacy and shield assets from creditors and ex-spouses.