There are many different types of trusts that help a variety of individuals meet their financial and estate planning goals. For wealthy individuals and families who are looking to protect their assets, a self-settled spendthrift trust may be the answer. A recent article discusses how individuals and families can use self-settled spendthrift trusts in order to protect their assets.
Self-settled trusts are a special type of revocable trust under which the grantor is also the trust’s primary beneficiary. These trusts are used particularly to shelter assets from future creditors or future ex-spouses. In order to provide this protection, the trust is set up with a spendthrift provision. This provision prohibits the grantor, as well as his or her creditors, from reaching the assets inside the trust.
Due to the spendthrift provision, an independent trustee controls all distributions made out of the trust. Although the trustee can make distributions to the grantor, he or she is not required to do so. If a creditor or former spouse makes a claim against the grantor, the trustee can cease distributions to the grantor in order to shield the assets.
Although spendthrift trusts are a great way to avoid creditors, it is important to remember that spendthrift trusts cannot be set up to avoid a creditor who has already made a claim against you. Trusts may not be set up in order to hinder and defraud creditors.
For assistance in protecting your assets, contact us at (626) 696-3145.
