In order for a Trust to effectively provide asset protection against potential creditors or claimants, it should contain the following key elements:
- The Trust is Irrevocable (and not Revocable)
- Contains a Spendthrift Clause
- Discretionary Distributions (vs. mandatory and/or period payments)
- Third Party Beneficiaries (i.e. not self-settled for own benefit)
If the settlor wishes to reserve additioanl oversight and reservation of rights, an impartial Trust Protector or Advisor can be appointed.
Another variation of an Asset Protection Trust is a foreign Trust with friendly and flexible laws for the Trust and Trustee, while possing legal obstacles for the Creditor.
A Trust Protector is a fourth participant in a trust arrangement. The others include the Settlor (or Grantor), the Trustee, and the Beneficiary.
A Trust Protector advises on limited but fundamental and important trust decisions. The Trust Protector is not a fiduciary like the Trustee.
Common powers entrusted to the Trust Protector include: removing and replacing the Trustee, amending Trust terms for tax purposes, removing and adding Beneficiaries, and amending distribution provisions.
A Trust Protector should not be the settlor, the beneficiary, or the trustee, or an agent thereof, but an impartial fourth party.
A Trust protector can be added to a Revocable or Irrevocable Trust.
A Trust Protector can become important within the context of an irrevocable trust where the Settlor does not wish to totally relinquish all important rights, but instead entrusts the Protector as a check and oversight on the Trustee.
For more questions or inquiries please contact the Law Offices of Hanlen J. Chang