Protecting trust assets from a judgment against a beneficiary

Protecting trust assets from a judgment against a beneficiary

If a named beneficiary has a court ordered judgment against him, and money has already been taken from his accounts by means of the judgment, how can the assets involved in a will or trust be protected from judgment action upon the death of a family member making a bequest under a will or a gift through a trust?


To protect a gift or bequest to a beneficiary, the person making the gift or bequest should leave or give the assets to a trust for the beneficiary, not direct to the beneficiary. The trust should include a host of provisions to address the risks of claims, including but not limited to some of the following: o The trust should be for the lifetime of the beneficiary. If the trust is for a term of years, say 10 years, the present value of the future payment may be significant enough for a claimant to wait for. If the trust if perpetual (most states don't permit this) the assets should be more secure. o The trust should leave to the discretion of an independent trustee the right to make distributions to the beneficiary. No mandatory distributions should be required. Thus, the total return or uni-trusts arrangements that are receiving so much attention today should not be used. The common "pay income" trust that had been and remains quite popular should not be used. o The trust could include a spendthrift clause prohibiting the beneficiary from assigning the beneficiary's interests to claimants. o The trust might be formed in a jurisdiction (state or country) with laws that are less favorable to claimants. This might require naming an institutional co-trustee in that jurisdiction. For more information see: Shenkman, "Inherit More" published by John Wiley & Sons., Inc.

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