CA Estate Planning Blog

Wednesday, October 21, 2015

Personal Asset Trust

What is a personal asset trust and what are its benefits?

When you establish a personal asset trust (PAT), instead of receiving your inheritance directly, your beneficiaries receive it in a special trust which emanates from your Living Trust. The Personal Asset Trust is under the control of each beneficiary. The benefit here is that each beneficiary has the same rights of ownership, but without the exposure to liability that ownership usually involves.

The Benefits of a Personal Asset Trust

The beneficiary can be an individual initial trustee, in control of his or her own Personal Asset Trust, controlling the investment of his or her inheritance, its distribution, and even who may receive it after his or her death. Trustees, if they wish, may establish limits on this inheritance, limiting its distributions, for example, to only their lineal descendants.

The necessary level of asset protection can be determined by the beneficiary who will, after all, have the benefits of 20/20 hindsight after the testator has passed. In cases in which a moderate level of protection is appropriate, an independent co-trustee or sole trustee may be brought in to sign off on distributions. When a greater level of asset protection is needed, an independent trust protector can "lockdown" the trust. This has the effect of establishing even more rigid control against the attack of third parties. Whatever the circumstances, the beneficiary who becomes the trustee of a PAT has the advantage of enjoying additional asset protection while continuing to exert control over his or her inheritance.


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