Milpitas, CA estates & probate attorney Elijah Keyes discusses how to protect your assets from potential creditors and legal claims. Regrettably, individuals residing in California face limitations when it comes to safeguarding their personal assets from potential creditors and legal claims in the future. This contrasts with the options available in certain other states where such protection is feasible. However, in California, individuals can employ a different strategy by focusing on protecting the assets of their children and younger generations. Many of the parents represented by the firm opt to establish a legal entity known as a “dynasty trust,” which, in technical terms, falls under the category of a “generation-skipping transfer tax trust.”
This dynasty trust serves as a protective shield for the child, shielding their assets from potential loss due to events like divorce or claims from creditors. Instead of directly bequeathing assets to the child, parents may channel those assets into the dynasty trust. Within this trust, the child stands as the sole beneficiary, the sole recipient, and the exclusive entity entitled to receive the assets. The strength of this arrangement lies in its resilience against creditors, making it difficult for them to access the trust’s assets, thus safeguarding the child’s financial interests.
Returning to the specific inquiry regarding individual asset protection from creditors within California, the unfortunate reality is that such protection is not achievable within the state’s legal framework. In contrast, other states, including Alaska, Nevada, South Dakota, Delaware, and Texas, offer specific mechanisms allowing individuals to shield their assets from personal creditors. However, it is essential to note that these avenues can be costly and complex. Therefore, they may only be financially viable for individuals with substantial resources to protect.