You have worked hard most of your life to build your legacy. Your legacy includes your property and finances that you will have the honor to pass on to your future generations. It is a legacy which will help provide a better life for your children, grandchildren, great-grandchildren, and so on. You want to protect this legacy from creditors looking to get a piece of your pie after you die. There are a few estate planning asset protection strategies in WV to examine with your estate planning attorney to ensure that your legacy is protected.
Using a Spendthrift Trust as One of Your Estate Planning Asset Protection Strategies in WV
One strategy for asset protection is a self-settled spendthrift trust, also called a domestic asset protection trust (DAPT). Although this type of asset protection trust is not legally allowed or recognized in much of the U.S., West Virginia became the 16th state in the U.S. to allow these types of trusts in 2016.
A spendthrift trust is a trust that sets aside property and/or financial assets for one or more beneficiaries but whose assets the beneficiary cannot sell or give away. In this way, the trust protects those assets from any creditors attempting to collect a debt from the beneficiary. Creditors cannot make a claim for any assets that are held by a spendthrift trust.
Spendthrift Trust vs. a Self-Settled Spendthrift Trust in WV
A spendthrift trust becomes known as a self-settled spendthrift trust when the creator of the trust is also a beneficiary of the trust. This type of trust creates asset protection from creditors while also allowing the creator, or grantor, to continue controlling the assets within the trust while still alive.
Both spendthrift trusts and a self-settled spendthrift trusts are used as estate planning asset protection strategies. However, it is important to note that there are specific guidelines to follow to ensure that assets held in these types of trusts continue to be protected from creditors throughout the lifetime of the trust.
Requirements of Self-Settled Spendthrift Trusts in WV
The West Virginia Uniform Trust Code sets out specific requirements that for creating a qualified self-settled spendthrift trust. If the following requirements are not in place, the trust will be invalid, and the assets held in the trust will be subject to probate, taxes, and creditors' claims for collections:
· First, and foremost, the spendthrift trust must be an irrevocable trust. In West Virginia, the grantor of an irrevocable trust generally cannot change or terminate the trust except as allowed by the terms of the trust document.
· In a self-settled spendthrift trust, the creator, or grantor, may also be a beneficiary; however, the grantor cannot be the only beneficiary of the trust.
· The trust must have a qualified trustee as defined by West Virginia Code § 44D-5-503b.
· The grantor cannot disapprove distributions from the trust.
· The grantor must sign an affidavit before any asset is transferred into the trust. This affidavit must be a testament stating, part, that any assets being moved into the trust were not obtained illegally and that the transfer is not a direct attempt to evade creditors or a direct attempt to protect the assets from impending bankruptcy filings.
One of the benefits of domestic asset protection trusts is that they can be established in any state that allows this type of spendthrift trust. In other words, you can establish a WV domestic asset protection trust even if you don't live in West Virginia.
Are Spendthrift Trusts Foolproof Estate Planning Asset Protection Strategies in WV?
There are some situations in which a spendthrift trust or self-settled spendthrift trust in WV cannot protect the assets contained in the trust. Under West Virginia Code § 44D-5-503, the trust is unenforceable, and the assets held in the trust are not protected in the following situations:
· Medicaid asset protection planning.
· A child support order or judgment against any beneficiary of the trust. If a beneficiary fails to pay child support as ordered by a court, the court can order that assets from the spendthrift trust be used to cover child support payments.
· Any creditor or fees associated with representing a beneficiary to protect their interest in the trust.
· A claim of the state of West Virginia or the United States if and when the law allows.
Where Can You Turn for Help with Estate Planning Strategies?
Estate planning can be a complicated process. You spend your life building your nest egg and you want to protect it from creditors, who will whittle it away from your beneficiaries if they can. Examining estate planning asset protection strategies in WV is an important part of preserving your legacy for the benefit of yourself and your loved ones after you're gone. If you would like discuss your options for estate planning asset protection strategies, please contact me, Anna M. Price at Jenkins Fenstermaker, PLLC by calling 866.617.4736 or completing this e-mail Contact form.