Meet Our Team


David Fall Attorney Tampa
David Fall

Corporate & Tax
Estate & Probate

Western New England School of Law, LL.M.
in Elder Law and
Estate Planning, 2016
Univ. of Alabama, LL.M. in Taxation, 2012
Washburn Univ. School of Law, J.D., 2011
California State University, Chico, B.A. in Psychology, 2006

• Formal vs Summary Administration

• Liquidating An S Corporation

• Surviving Spouses Benefits

• Revocable Trusts and their Benefits

• Do You Prefer "Per Stirpes" or "Per Capita"?

• Special Needs Trusts Preserve Income For The Disabled


Get A Trust And You Can Tell Creditors To Go Away

A trust is still one of the most popular estate planning documents due in large part to its versatility and asset protection characteristics. The creator of a trust (usually referred to as the "settlor" or "grantor") can create a trust during his or her lifetime or create a trust through his or her will. There are various types of trusts, each having its own benefits and liabilities, and a trust can be written to accomplish a wide variety of goals.

In a trust, the grantor relinquishes control of any property contributed to that trust to the trustee of that trust. However, through the terms of the trust, the grantor determines the beneficiaries of the trust and under what conditions the income and principal of the trust can be distributed to the beneficiaries by the trustee.

A very popular kind of trust is the revocable trust. A revocable trust gives the grantor the ability to modify the terms of the trust or completely revoke it at any time during the grantor's lifetime. The grantor may revoke or amend any trust unless the trust instrument expressly provides otherwise. Upon the grantor's death, a revocable trust becomes irrevocable and the terms of the trust, including those that govern the distribution of trust property, cannot be amended.

The downside to a revocable trust is that the assets transferred into the trust are still considered the grantor's personal assets; thus, those trust assets are susceptible to the claims of the grantor's creditors. Whereas the assets in an irrevocable trust are no longer considered the assets of the grantor and, therefore, are protected against claims by the grantor's creditor's. Consequently, a revocable trust does add a significant layer of creditor protection, but it's not the best means to protect your assets.

It's possible to afford a trust further protection against creditors by adding a spendthrift provision. A spendthrift provision prevents creditors from reaching the trust beneficiary's interest in the trust before the beneficiary actually receives any trust property in case a beneficiary is sued and a judgment creditor tries to reach the beneficiary's interest in the trust. However, the spendthrift protection only insulates the trust property when it's in the trust. Once the trust property has been distributed to the beneficiary, a creditor can claim that property for repayment of the debt owed by the beneficiary, except to the extent the distributed trust property is used to actually support the beneficiary.

Likewise, if the terms of the trust require that a distribution be made to the beneficiary, but the beneficiary declines to accept the distribution, the spendthrift protection ceases for that distribution and the beneficiary's creditors can now reach the property that was to be distributed to the beneficiary. This is the negative aspect of having mandatory distributions in a trust.

For purposes of enforcing the spendthrift provision, it's more useful to give the trustee the discretion to make distributions. Creditors cannot compel the trustee to make a discretionary distribution if the distribution could be seized by the creditors. This also applies in situations where the trustee is also a beneficiary, provided the benefit is limited by some ascertainable standard, like giving the trustee the ability to make distributions only for the health, education, maintenance, or support of the beneficiary. However, in a trust where the grantor is also the beneficiary (called a self-settled trust), a creditor of the grantor can reach the entire amount that can be distributed for the grantor's benefit. 

According to Florida law, a spendthrift provision is valid only if the provision restrains both voluntary and involuntary transfers of a beneficiary's interest. In other words, the spendthrift protection won't apply if the beneficiary is able to voluntarily assign his or her interest in the trust. A spendthrift provision is also unenforceable against a beneficiary's child, spouse, or former spouse who has a judgment or court order against the beneficiary for child support or alimony or the like, and is also unenforceable against a judgment creditor who has provided services for the protection of a beneficiary's interest in the trust.

Nonetheless, despite these limited drawbacks, a trust is still one of the most efficient and useful asset protection instruments available. Besides asset protection, a trust allows the grantor to avoid probate for those assets held in trust so that those assets are inherited by the intended beneficiaries without having to go through the courts. A trust also allows the grantor to hand over control of assets in the trust to the trustee who is then responsible for properly managing those assets.

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Older Lundy & Alvarez © 2018 • Attorneys at Law

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