Safe Harbor Trusts Help You Plan for the Future

Safe harbor trusts exist as a mechanism to protect a person's financial assets for a few different reasons. Originally conceived in California, many people nationwide now use these types of trusts as a component of their family wealth planning.

A "special needs trust" serves as an example of a safe harbor trust, or a vehicle used to protect assets. Some families would like to put money into a trust to provide support for a disabled child. Prior to 1993, if a disabled child received more than $2,000 as a "gift," he or she would no longer qualify for much-needed state and federal benefits. Congress created safe harbor trusts in 1993 to allow a shelter for certain funds. This permits individuals to omit these funds in applications for state Medicaid and other types of aid that depend on a person's level of financial need.

Safe harbor trusts have evolved to help people with other types of issues, but the underlying principle works the same. A credit shelter trust, one variation on the theme, allows married couples to protect a portion of their money from estate taxes when one spouse dies. Financial planning helps families keep hold of their hard-earned assets. Planning one's finances with a good financial planner could become a very wise investment in itself.