Under Virginia Law, effective 1 October 2012, people may transfer their property interests into Virginia self settled spendthrift trusts for asset protection purposes so that the qualified trust property can be protected from the Settlor's creditors.
A Settlor (Trust Creator or Grantor) can transfer property to a trust that qualifies for Spendthrift Property Protection for the Settlor.
What Does Spendthrift Property Protection Do?
Spendthrift Property protection prevents a creditor from reaching said Spendthrift Property before it’s received by the beneficiary. It prevents attachment to present and future distributions of said Property.
Exceptions to Spendthrift Property Protection:
1. Child Support or Maintenance
2.Creditors who protected the Settlor's interest in the Trust (Drafting Attorney, Litigation Attorney & Others Defending Settlor)
3.State & Federal Government Authorities
NOTE:
Virginia residents & Non-Virginia residents may benefit from Virginia Self Settled Trusts
Certain Rules that apply to Spendthrift trusts;
Self Settled Spendthrift Trust must be an Irrevocable Living Trust that has the following:
- Virginia Law governing trust validity, construction & administration
- At least one other beneficiary (not the Settlor) for the Spendthrift Property
- Language expressly invoking "Spendthrift Property Protection" for the Settlor-Beneficiary that restrains voluntary and involuntary transfers by the Settlor-Beneficiary of the Spendthrift Property
- Language that precludes Settlor from disproving distributions of any Trust Property
- Has at all times a "Qualified Trustee" (any natural person residing within the Commonwealth or a legal entity authorized to engage in trust business within the Commonwealth; and who maintains or arranges for custody within the Commonwealth of some or all of the property that has been transferred to the trust by the Settlor, maintains records within the Commonwealth for the trust on an exclusive or nonexclusive basis, prepares or arranges for the preparation within the Commonwealth of fiduciary income tax returns for the trust, or otherwise materially participates within the Commonwealth in the administration of the trust)
- A trustee is not a qualified trustee if such trustee's authority to make distributions of income or principal or both is subject to the direction of someone who, were that person a trustee of the trust, would not meet the requirements to be a qualified trustee.
If you have any questions about Virginia Self Settled Spendthrift Trusts, feel welcome to contact Luke Lenzi at the Lenzi Law Firm, PLLC.