Irrevocable Trust And Asset Protection Attorney In Utah

By Author: Lee S. McCullough
Total Articles: 1
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Irrevocable trusts have an infinite number of types,

variations, and options

These are some of the issues to consider in creating an

irrevocable trust:

1. Grantor. The grantor is the creator of the trust and the

person who is eligible to make gifts to the trust. You may

serve as the grantor of your own trust, or you may ask a

parent or another relative to establish the trust for your

benefit.

2. Trustees. The trustees control the trust and make

decisions about investments and distributions. The trustees

have a duty to follow the instructions in the trust or they

can be held personally liable for breach of their duty to the

beneficiaries. You may choose one or more trustees and you may

give them equal powers or you may divide the powers and

responsibilities of the trustee as you see fit. The grantor

cannot serve as a trustee, but it is possible for a

beneficiary to serve as a trustee. The trust document should

name the successor trustees if the original trustees should

cease ...
... or fail to serve, or it should include a formula for

electing the successor trustees.

3. Beneficiaries. The beneficiaries are the people who are

eligible to receive benefits from the trust. You can name as

many potential beneficiaries as you wish. You can define their

rights in any manner, but it is usually best for asset

protection purposes to limit the rights of the beneficiaries

and give the trustees the discretion to determine how much or

how little to give to the beneficiaries.

4. Trust Protector. The trust protector is an independent

person with special powers to watch over the trustees and

ensure that the trust accomplishes its intended purposes. You

may give the trust protector the power to remove and replace

the trustees, to terminate the trust, to amend the trust to

adapt to changes in the law, to divide the trust in the event

of divorce, to eliminate a beneficiary from the trust, to add

beneficiaries to the trust, and to exercise these powers with

or without the consent of the grantor, the trustees, or the

beneficiaries.

5. Governing Law. You can generally choose the law that

will govern your trust by designating the governing law in the

trust instrument and by choosing a trustee located in the

jurisdiction where you want the trust to be governed. Offshore

trusts can provide excellent protection, but they tend to have

a negative image that can do more harm than good. There is a

vast difference in the laws of the different states and it is

critically important to choose a jurisdiction whose laws are

best suited to accomplish your purposes. For example, in many

states, the ex-spouses of a beneficiary have a claim on the

assets of the trust for alimony, support, and even property

division in the event of a divorce. Other states specifically

provide that a beneficial interest in a trust is not a

property right and that distributions may be made in the

“absolute” discretion of the trustee.

6. Distributions During Life. I generally recommend that

you leave the distribution schedule flexible during your life

and allow the trustees discretion to make distributions among

a large pool of potential beneficiaries at such times and in

such amounts as they determine.

7. Distributions After Your Death. Most clients leave

specific instructions for the division and distribution of

assets after their death. I generally suggest that you give

the trustees discretion to continue the trust after your

death, in order to protect your spouse and children from a

remarriage, divorce, bankruptcy, or other unexpected

liability. You can limit the rights of the beneficiaries in

order to protect them from themselves, or you can give them

the power to serve as their own trustee and distribute the

assets to themselves as they wish.

8. Powers of Appointment. A power of appointment is a power

given to any person to change or “re-write” the requirements

of the trust. You can give the beneficiaries or others broad

powers to make changes, or you can give them limited powers to

make changes within a certain group of beneficiaries. For

example, you may give your spouse the power to make changes

among your children after your death, but not the power to

give all the assets to a new spouse.

9. Income Tax Treatment. You may design your trust so that

its income is taxable to you, to the beneficiaries, or to the

trust itself. These are important decisions that should be

made with the help of a qualified tax attorney. You may also

design the trust with enough flexibility so that the income

tax treatment can be changed from time to time. You may choose

to have the trust income taxable to yourself for a time so the

assets of the trust can grow tax free. This “tax burn”

technique is a powerful tool for the elimination of estate

taxes.

10. Gift and Estate Tax Treatment. You can design an

irrevocable trust so that its assets are included or excluded

from your taxable estate. If you want to transfer unlimited

amounts to an asset protection trust without any gift tax

consequences, you will design your trust so it is included in

your taxable estate. If your purpose is to avoid the estate

tax, you will design your trust so that it is excluded from

your taxable estate.

11. Control. If you can find a parent or another person to

serve as the grantor of your trust, you can serve as a trustee

and retain significant control over your own trust. If you are

the grantor, you may want to have the trust create a limited

liability company with you as manager so you can retain

control over the assets.

12. Flexibility in an Irrevocable Trust. The word

“irrevocable” can be frightening and misleading. A trust is

irrevocable if the grantor retains no power to obtain

possession of the assets of the trust or to amend the trust.

However, there are many ways for a grantor to retain control,

flexibility, and access to the benefits of an irrevocable

trust. A good asset protection attorney should be able to give

you the control and flexibility that you want without giving

you so much legal control that you lose the asset protection

and estate tax benefits of the trust.