2016) (overruling the Massachusetts Appeals Court's holding that a husband's beneficial interest in a discretionary spendthrift trust
, subject to an ascertainable standard with an open class of beneficiaries, was too speculative to constitute a property interest and instead was only an expectancy).
Nevada asset protection trusts allow for "self-settled" spendthrift trusts
. Almost every state recognizes some form of spendthrift trusts
, in which the beneficiaries' creditors cannot get to the beneficiaries' interests in the trust, but most of them do not permit the creator of the trust to establish a "self-settled" spendthrift trust
These pronouncements indicate that a self-settled spendthrift trust
, when created, could be structured as a completed gift, provided that no income or principal can be transferred to the settlor's creditors or estate.
Among them: providing for mentally impaired or disabled children (such as via a special needs trust); dividing an estate equitably among spouses and children from "blended families" (i.e., from different marriages); and distributing income in a controlled fashion (as via a spendthrift trust
created for the benefit of individuals unable to stay within a budget).
(27) Beginning with the foundation of a standard spendthrift trust
, these jurisdictions made major changes, including offering settlors the ability to transfer money into a trust, the ability to appoint a trustee who has discretion over how to distribute the income to the beneficiaries, and, in the case of a self-settled trust, the ability to make the settlor a beneficiary.
If the trust also contains provisions that prevent creditors from reaching trust assets, the trust is known as a "domestic asset protection trust" (DAPT), "asset protection trust" (APT), or a "self-settled spendthrift trust
A spendthrift trust
protects the assets of the trust from the claims of the beneficiaries' creditors.
A special needs trust must be a discretionary, spendthrift trust
where the beneficiary has no control whatever over distributions.
. These trusts are created by one person, most commonly a parent, for the benefit of another person, such as a child.
There is, however, some continuing activity to modify or fine-tune the specifics of spendthrift trust
rules in the various states, although one can hardly say that there is a recognizable direction in this "stirring around."(61) On the other hand, because spendthrift protections do not validly apply to interests retained by settlors,(62) various modern developments in the use and design of trusts(63) have required some elaboration and refinement of rules about when a beneficiary is or may become a settlor.(64)
The author was told the following story by a lawyer: The client came in and asked for a Cook Islands trust for his son, "the bum." As it turned out, all he wanted, or needed, was a domestic spendthrift trust
. But the magazine he read would never have run an article on domestic spendthrift trusts--boring.
The Death of Liability describes the decade-old boom in offshore "asset-protection trusts"--devices sited in offshore havens but widely promoted here as an effective means for Americans to render themselves judgment proof.(18) "Asset-protection trust" is merely a euphemism for "self-settled spendthrift trust
." Self-settled spendthrift trusts
are, in essence, private declarations by property owners that they will retain full use and control of their assets, but that their judgment creditors will not be able to reach them.