What is the difference between an asset protection trust and an irrevocable trust?

Asset protection trusts and irrevocable trusts are both types of trusts commonly used in California. They can both be used to protect assets from creditors and can potentially reduce either federal or state taxes, depending on the type of trust that is used. An asset protection trust is a trust that is created for the express purpose of protecting assets from creditors. This type of trust typically requires the beneficiary to give up ownership of the assets transferred to it so that even if a creditor seeks to take the assets, they cannot. It is also important to note that the settlor, or the one who creates the trust, cannot be the beneficiary of an asset protection trust. An irrevocable trust is a trust that, once it has been created, cannot be modified or revoked by the settlor. Because of this, the settlor is essentially giving up control of the assets that are transferred to it. This type of trust is usually favored by those who want to reduce their estate taxes or by those who want to provide for a minor child, as the assets are kept in the trust until the minor child has reached the age of majority. The key difference between an asset protection trust and an irrevocable trust is that the former is created specifically to protect assets from creditors, while the latter allows for the settlor to reduce estate taxes or provide for a minor child. Both of these types of trusts offer valuable estate planning opportunities in California and should be discussed with a qualified attorney before making any decisions.

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What is the difference between an asset protection trust and an irrevocable trust?

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