Asset protection is a crucial component of estate planning. Most assume that asset protection is for the extremely wealth. However, most individuals and families can benefit from some form of asset protection planning. It is just the case that more at risk individuals will likely need more sophisticated plans.
The Missouri Uniform Trust Code was overhauled in 2005 to provide greater clarity to creditor rights with respect to trusts. If you are a beneficiary of a trust, a creditor can, in certain circumstances, seize your interest in the trust to satisfy a debt. Whether a creditor can claim a trust interest, though, depends primarily on the language of the trust — that is, whether a so-called spendthrift provision is present in the trust. A spendthrift clause is language in a Trust which prevents a beneficiary’s interest from being assigned or seized, either voluntarily or involuntarily. As a general matter, if your sole goal is to avoid potential creditor claims, it is better to draft a more restrictive spendthrift clause. The less present, possessory interest a beneficiary has in the trust the less likely a creditor can use the trust to collect. The reason for this is that because the beneficiary does not have a concrete claim of entitlement to the trust assets, the creditors cannot claim the trust assets because the beneficiary has little to no ownership and control over distributions.
But, as is often the case with Revocable Living Trusts, what happens when the assets you are trying to protect are in a “self-settled trust” (those where the client is the settlor, trustee, and primary beneficiary)? Indeed, things get much more complicated. The requirements of Mo.Rev.Stat. 465.505 need to be met precisely.
Because asset protection is such a fact sensitive inquiry, it is almost impossible to provide adequate information. As such, it is wise to plan in depth with an attorney to ensure that your specific needs are being met.