By: Joseph T. Buxton III, CELA*, Founder, TrustBuilders Law Group 

I have been writing trusts for the last 35 years to assist clients in protecting assets, avoiding probate and to protect beneficiary(s) from creditors, taxes, and other risk associated with transferring assets to the next generation.  In recent years, Virginia lawmakers have improved the environment for trusts.  Beginning in 2003, the Virginia General Assembly modified the English Rule Against Perpetuities permitting the use of “dynasty trusts” that can continue for multiple generations.  In 2006, Virginia passed the Virginia Trust Act codifying standard provisions for trusts to eliminate much of the need to involve the court in the proper interpretation and administration of trusts. 

This year, the Virginia legislature approved a new asset protection trust that would permit individuals to protect assets from their creditors.  Virginia now joins Alaska, Missouri, and ten other states in modifying their trust law to permit individuals to protect assets from future risks, known as a self-settled spendthrift trust under Virginia Code Section 64.2-745(1) et seq.  This type of trust permits individuals to create an asset protection trust to provide creditor protection.  The trust must be irrevocable.  It must have been created during the lifetime of the individual.  It must, at all times, be a Virginia Trust and must have had at least one beneficiary other than the Grantor.  These asset protection trusts will have a “qualified” trustee as defined in the law, who may make distributions to the Grantor.  The trust must have asset protection spendthrift language to protect the assets from the Grantor’s creditors.  The Grantor, however, may not disapprove distributions from the trust.  While highly technical in nature, this new super trust may prove a useful tool for individuals to protect family wealth from future risk while still enjoying its benefits.

 

* Certified Elder Law Attorney by the National Elder Law Foundation