Q&A with Rollin Nash Jr.
Preservation trusts shield
Person's assets from creditors
Q: Do living trusts protect the assets owned by the living trust from the creditors of the person or persons who create the trust?
A: No. Typical living trusts established for estate planning purposes don't protect the person (“grantor”) who created the trust.
Q: Are there any types of trusts that will protect a person's assets from creditors?
A: Yes. In 2004, the Oklahoma Legislature approved the “Family Wealth Preservation Trust Act,” which is still a relatively unknown law that permits establishing a “preservation trust.” Its primary purpose is to protect from the grantor's creditors assets of up to $1 million in total value placed in the preservation trust, plus growth earned thereon.
Q: It is common for the grantor of a living trust to also be the trustee and the primary beneficiary of the living trust. Is the grantor of a preservation trust also eligible to be a beneficiary and the trustee?
A: No. The grantor of a preservation trust isn't eligible to be a beneficiary. However, eligible beneficiaries include, but are not limited to, the grantor's spouse, children and grandchildren. A husband and wife each can establish their own preservation trust, designating their spouse to be the beneficiary, and effectively protect up to $2 million of assets, plus growth thereon. All preservation trusts must have a trustee that's either an Oklahoma-based bank, savings association or credit union that maintains a trust department, or a trust company that's either chartered in Oklahoma or has a national charter and maintains a physical place of business in Oklahoma.
Q: Are there any restrictions regarding what type of assets are eligible to be placed in a preservation trust?
A: Yes. A “majority in value” of the assets must be considered to be “Oklahoma assets.” Oklahoma assets include, but are not limited to, stocks, bonds or ownership interests in Oklahoma-based companies; bonds issued by the state of Oklahoma or an Oklahoma governmental agency; accounts maintained with an Oklahoma-based bank; real estate and mineral interests located in Oklahoma. Assets that aren't “Oklahoma-based” also are protected, as long as those assets have a cumulative value of less than one half of the total value of the preservation trust's assets.
Q: Can a preservation trust be revoked?
A: Yes. It can be revoked at any time by the grantor. Once the preservation trust is revoked, its assets immediately lose protection from the grantor's creditors.
Q: Can you have more than one preservation trust?
A: No. An individual only may have one preservation trust at a time. Because they're revocable, a grantor could revoke an existing trust, and then immediately establish a new preservation trust.
PAULA BURKES, BUSINESS WRITER