What is a discretionary trust and how does it provide asset protection benefits?

A discretionary trust is a type of trust used for asset protection planning. It is designed to protect assets from creditors and litigation by placing them in a trust administered by a third-party trustee. The rights and benefits of the trust’s beneficiaries are determined by the terms of the trust. In California, a discretionary trust provides asset protection because it can be used to shield assets from creditors. The trust typically includes provisions limiting the creditors’ right to access the trust’s assets. The assets can be held in the name of the trust and not in the name of the grantor. Additionally, the grantor can limit the beneficiaries’ access to the trust’s assets, meaning the beneficiaries cannot use the assets to pay off creditors. A discretionary trust can also provide asset protection benefits for beneficiaries. For example, the trust can provide for distributions to be made on behalf of the beneficiary in cases where the beneficiary is facing financial hardship or liability. The assets in the trust are not treated as assets of the beneficiary, and thereby are not subject to creditor claims. In summary, a discretionary trust in California can provide asset protection benefits by shielding assets from creditors, limiting the beneficiaries’ access to the trust’s assets, and providing distributions on behalf of beneficiaries facing financial hardship or liability.

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What is a discretionary trust and how does it provide asset protection benefits?

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