Debtor May Be Able To Add Asset Protection Provisions To An Irrevocable Trust
Most families want simple estate plans. Sometimes the simple plan, a will leaving our money to our children equally and immediately upon our deaths, is a really bad estate plan in the event any of our children have legal problems after our deaths. A better plan, for asset protection, is an estate plan that holds the childrens' inheritance in a continuing trust where it remains protected from our childrens' creditors as long as they keep the trust in effect. A caller this past week told me his parents, recently deceased, had made a living trust which provided for the immediate distribution of his inheritance. The parents' trust was in the process of administration. The caller was concerned because he had a large potential judgment creditor. I explained that a judgment creditor could levy upon his share of the inheritance. The creditor could garnish the money payable to the debtor from the living trust.
If the debtor's parents were still alive they could amend their living trust plan to protect this child's inheritance in a continuing trust. However, after the parents are both deceased their living trust is irrevocable. The client wanted to know if it was possible to amend the provisions of his parents' trust when his parents are no long alive.
There are Florida statutes that provide for the modification of an irrevocable trust after the deaths of the trustmakers. Modification does not require a court order. The statutes state that the terms of an irrevocable trust may be changed with the consent of all the beneficiaries and the acting trustees. Contingent beneficiaries- people who may have a future interest in the trust estate- would probably have to agree to the modification. In this instance, if the caller and all his sibling beneficiaries, together with their adult children who have a potential future interest, agreed to modify their parents' trust they may be able to add asset protection provisions. The modification could apply only to the debtor child without affecting the other beneficiaries' inheritance. The family could amend the trust so that only money payable to the debtor child be maintained inside the trust under terms and conditions protecting the inheritance from the child's creditors.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
A properly planned estate package will include the following documents
Living will
Living trust
Power of Attorney and
Last Will and Testament
So before making plan just do these as soon as possible.
living trust