Revocable Trust Planning Thwarts Creditors - Washington Estate ...

Sometimes you may hear ?revocable trusts
provide no asset protection? ? now you know that is only half-true.

Trusts are powerful devices. In
fact, even ?revocable? trusts can afford valuable protection. Consider the case
of Frank and Geryl Pearl, as reported in a recent Forbes article titled ?Pearl -- Transfers to Revocable Trusts Were
Not Fraudulent Transfers As To Creditors Of The Settlor.?

Essentially, the Pearl case
illustrates the magic of a revocable trust. Frank, upon a cancer diagnosis,
moved his business assets under a revocable trust, which meant that he was
still effectively accountable for everything because the ?revocable? trust was
still under his control for all intents and purposes. Frank arranged for the
bank to name him personally as guarantor to the business loans. Geryl was named
beneficiary to the trust. When Frank died, the assets in the trust that were
otherwise entirely accessible to the bank and other creditors passed over to
Geryl and were completely inaccessible to the creditors. Poof! How did this
happen? As summarized by Forbes:

?It should not be overlooked that a revocable trust can
provide near-absolute asset protection to the beneficiaries of the trust after
the settlor dies, so long as the trust is well-drafted, has only discretionary
distribution, and a solid spendthrift clause. What is no protection for the settlor
almost magically turns into fantastic protection for beneficiaries after the
settlor?s death. A beneficiary?s interest is simply not acceptable by creditors
except in the most extreme cases, such as unpaid child support or if the
beneficiary commits a violent crime, etc.?

The Pearl case is an interesting
one for those planning their estates (and their creditors). To learn more you
can consult the Forbes article, the
case itself (as cited in the article), and consult with competent legal counsel
before relying on this case in your own planning.

Reference: Forbes
(September 30, 2012) ?Pearl -- Transfers to Revocable Trusts Were
Not Fraudulent Transfers As To Creditors Of The Settlor?

Source: http://blog.moultonlaw.com/2012/10/revocable-trust-planning-thwarts-creditors.html

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