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    Oct 17 12

    Revocable Trust Planning Thwarts Creditors

    Newport Beach Law Firm

    Sometimes you may hear “revocable trusts
    provide no asset protection” — now you know that is only half-true.

    Trusts are powerful devices. In
    fact, even “revocable” trusts can afford valuable protection. Consider the case
    of Frank and Geryl Pearl, as reported in a recent Forbes article titled “Pearl — Transfers to Revocable Trusts Were
    Not Fraudulent Transfers As To Creditors Of The Settlor
    .

    Essentially, the Pearl case
    illustrates the magic of a revocable trust. Frank, upon a cancer diagnosis,
    moved his business assets under a revocable trust, which meant that he was
    still effectively accountable for everything because the “revocable” trust was
    still under his control for all intents and purposes. Frank arranged for the
    bank to name him personally as guarantor to the business loans. Geryl was named
    beneficiary to the trust. When Frank died, the assets in the trust that were
    otherwise entirely accessible to the bank and other creditors passed over to
    Geryl and were completely inaccessible to the creditors. Poof! How did this
    happen? As summarized by Forbes:

    “It should not be overlooked that a revocable trust can
    provide near-absolute asset protection to the beneficiaries of the trust after
    the settlor dies, so long as the trust is well-drafted, has only discretionary
    distribution, and a solid spendthrift clause. What is no protection for the settlor
    almost magically turns into fantastic protection for beneficiaries after the
    settlor’s death. A beneficiary’s interest is simply not acceptable by creditors
    except in the most extreme cases, such as unpaid child support or if the
    beneficiary commits a violent crime, etc.”

    The Pearl
    case is an interesting one for those planning their estates (and their
    creditors). To learn more you can consult the Forbes article, the case itself (as cited in the article), and
    consult with competent legal counsel before relying on this case in your own
    planning.

    Contact Meier Law Firm to discuss all of your estate planning options.

    Reference: Forbes
    (September 30, 2012) “Pearl — Transfers to Revocable Trusts Were
    Not Fraudulent Transfers As To Creditors Of The Settlor




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