Authored by Kristin Gifford
One advantage of holding assets in trust is that it allows the grantors, or the persons forming the trust, to set forth specific parameters for the use of their assets. When contemplating these distribution parameters, grantors often try to anticipate at what ages their heirs will be responsible to receive the assets. As a result, it is common for trusts to include distribution language based on the beneficiary attaining specific ages. For example, many trusts include language that after the passing of the surviving grantor, the remaining assets are divided equally among the grantors’ children and held in trust until age 25 with one-fourth of the beneficiary’s trust distributed outright to the beneficiary at ages 25, 30, and 35, and any balance distributed outright to the beneficiary at age 40.
Before grantors choose outright distributions as described above, they might instead consider retaining assets in trust for the beneficiary’s lifetime and possibly allowing the beneficiary to serve as a co-trustee and/or sole trustee of the beneficiary’s trust at various ages. With this structure, the grantors have created an asset protection trust for their heirs that protects them from creditors, including potential future ex-spouses. As trustee of his/her own trust, the beneficiary is in control of the investment and distributions of assets, can invest in various assets within the trust, and the assets remain creditor protected until distributed out of the trust. If the beneficiary were to have a creditor issue, the beneficiary would appoint an independent trustee with discretionary distribution authority to prevent distributions of trust assets to that creditor.
To maximize the benefit of a beneficiary’s trust, it is important for the beneficiary to understand the structure of the trust. At Lobb & Plewe, we work with families across generations to find the best structure for each family and educate grantors and beneficiaries to protect families’ hard-earned assets.