A vital component of estate planning involves preserving and protecting one's wealth, the accumulation of which has likely required the better part of a lifetime. Asset protection strategies are being implemented with ever greater frequency to stem the tide of nuisance lawsuits. When considering such strategies, keep in mind that transfers of property using these techniques are subject to your state's fraudulent conveyance laws, which will "undo" any conveyance of property which was made to hinder, delay or defraud a current or future creditor. Contrary to the belief of many, a revocable trust (i.e., one which gives the grantor the power to revoke, amend or modify the trust at any time) will not protect the grantor from creditors; however, it can protect the beneficiaries (other than the grantor) from their creditors if the trust has a spendthrift provision. A spendthrift provision prevents a trust beneficiary from transferring, assigning or selling his or her interest in the principal and/or income of the trust, either voluntarily or involuntarily. To achieve protection for the beneficiaries, the trust should be set up so that the principal and income continue in trust on the death of the grantor, and remain subject to a spendthrift provision.
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