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.