A trust is a legal mechanism in which a person can secure property or money on behalf of a third party. Many people set up asset protection trusts to prevent family wealth or property from being lost in the event of bad economic situations. It is relatively easy to set up these vehicles with the help of a wealth advisor or estates attorney.
There are three parties involved with the creation of a trust. The first is the settlor, who is the person or group that wants to set up the structure on behalf of another person. The second party is the beneficiary, who is the individual or group of persons entitled to the property or money. The third party is the trustee, who is the person responsible for managing the property or money on behalf of the beneficiary, usually until the beneficiary comes of age. The trustee looks out for the interests of the beneficiary.
One concern was that creditors would try to seize the property or money from the beneficiaries to pay outstanding debts. To guard against this, settlors began to include spendthrift clauses in the terms of the trust agreements to prevent the beneficiaries from losing their estates to creditors. There have been many court challenges to determine the validity of these spendthrift clauses. The courts have generally accepted that spendthrift clauses against beneficiaries and their creditors are acceptable, but may not be enforced against the creditors of the settlor.
It is important to remember, however, that there are some exceptions to this rule. If the beneficiary has support obligations to a former spouse or a child who is still a minor, then the courts may order a trustee to satisfy those obligations from the funds held in the trust.
However, there are some exceptions to the spendthrift clause. In cases of self-settled estates, when the settlor is also the beneficiary, the spendthrift clause will not apply. Also, when the debtor is the sole beneficiary as well as the sole trustee, or when support payments are owed to another person, the spendthrift clauses will not apply in these cases.
There are certain stipulations, however, as to what constitutes a valid trust vehicle. They must be irrevocable, which means that they cannot provide protection beyond what the settlor has the power to revoke. They normally also contain spendthrift clauses, which prevents the beneficiary from losing their interests to a creditor.
Sometimes these structures are set up offshore, which means that they are not administered in the United States. An offshore trust structure is not completely private, however. There are still many reporting requirements and disclosure requirements that are enforced by the Internal Revenue.
Before you set up asset protection trusts, make sure you sit down with a good lawyer and discuss your intentions thoroughly. In your discussions, make sure you outline exactly who the beneficiaries are and what assets, such as property or money, are to covered.
There are three parties involved with the creation of a trust. The first is the settlor, who is the person or group that wants to set up the structure on behalf of another person. The second party is the beneficiary, who is the individual or group of persons entitled to the property or money. The third party is the trustee, who is the person responsible for managing the property or money on behalf of the beneficiary, usually until the beneficiary comes of age. The trustee looks out for the interests of the beneficiary.
One concern was that creditors would try to seize the property or money from the beneficiaries to pay outstanding debts. To guard against this, settlors began to include spendthrift clauses in the terms of the trust agreements to prevent the beneficiaries from losing their estates to creditors. There have been many court challenges to determine the validity of these spendthrift clauses. The courts have generally accepted that spendthrift clauses against beneficiaries and their creditors are acceptable, but may not be enforced against the creditors of the settlor.
It is important to remember, however, that there are some exceptions to this rule. If the beneficiary has support obligations to a former spouse or a child who is still a minor, then the courts may order a trustee to satisfy those obligations from the funds held in the trust.
However, there are some exceptions to the spendthrift clause. In cases of self-settled estates, when the settlor is also the beneficiary, the spendthrift clause will not apply. Also, when the debtor is the sole beneficiary as well as the sole trustee, or when support payments are owed to another person, the spendthrift clauses will not apply in these cases.
There are certain stipulations, however, as to what constitutes a valid trust vehicle. They must be irrevocable, which means that they cannot provide protection beyond what the settlor has the power to revoke. They normally also contain spendthrift clauses, which prevents the beneficiary from losing their interests to a creditor.
Sometimes these structures are set up offshore, which means that they are not administered in the United States. An offshore trust structure is not completely private, however. There are still many reporting requirements and disclosure requirements that are enforced by the Internal Revenue.
Before you set up asset protection trusts, make sure you sit down with a good lawyer and discuss your intentions thoroughly. In your discussions, make sure you outline exactly who the beneficiaries are and what assets, such as property or money, are to covered.
About the Author:
Learn more about asset protection trusts instantly on the Web. Stop by our website and find out all the details at http://www.assetprotection.com today.