Certain other types of trust, particularly when coupled with spendthrift language, may protect certain assets from the claims of creditors.
These include ‘remainder trusts’ and ‘trust-like arrangements’ such as Joint Purchase Agreements (which may or may not be structured as a formal trust).
With a remainder trust, the at-risk individual is the beneficiary of only the life estate of the asset held by the trust, while his or her family members or other selected individuals are designated as beneficiaries of the remainder interest.
Therefore, while a creditor may seek to levy on the at-risk individual’s ‘life estate’ in the property, the ultimate ownership of the property will pass to the beneficiaries selected by the individual, unaffected by such creditor claims.
Charitable Remainder Trusts may also be used to protect assets for those individuals who have charitable interests.
For example, assets may be placed in a trust whereby a fixed income is received by the individual for each year for a term of years or for the individual’s lifetime or joint lifetimes with his spouse or children.
The individual’s creditors cannot reach the principal of the trust and, if his or her creditors attempt to reach the income, then a ‘spray’ provision in the trust can authorize the Trustee to pay the income of the trust to spouse or children.