A non-grantor irrevocable complex discretionary spendthrift trust is a type of trust that is set up to protect the assets of the trust from creditors of the beneficiaries.
- “Non-grantor” refers to the fact that the person who creates the trust (the grantor) does not retain any control over the assets or income of the trust, and therefore cannot access the trust assets or income for their own benefit.
- “Irrevocable” means that the trust cannot be modified or terminated by the grantor once it has been created.
- “Complex” refers to the fact that the trust may have multiple layers of beneficiaries, and the trust may have complex rules and provisions for how the assets and income of the trust will be distributed.
- “Discretionary” means that the trustee, who is the person in charge of managing the trust, has discretion over how the trust assets and income will be distributed to the beneficiaries. This can be used to protect the assets of the trust from creditors of the beneficiaries.
- “Spendthrift” refers to the fact that the trust can be set up in such a way that the beneficiaries cannot access the trust assets or income until a certain age or until certain conditions are met, which can also protect the assets of the trust from creditors of the beneficiaries.
This type of trust can be a useful tool for protecting assets for beneficiaries who may be facing financial difficulties, such as those with high levels of debt or who are subject to lawsuits. However, it can also be complex and difficult to administer, and it is important to consult with an experienced attorney and tax professional to ensure that the trust is set up and administered properly.
Setting up a non-grantor irrevocable complex discretionary spendthrift trust can be a complex process that requires the guidance of an experienced attorney and tax professional. Here are some general steps that may be involved in setting up this type of trust:
- Choose a trustee: Select a trusted individual or institution to act as the trustee of the trust. The trustee will be responsible for managing the trust assets and distributing them to the beneficiaries according to the terms of the trust.
- Draft the trust document: Work with an attorney to draft a trust document that outlines the terms of the trust, including the purpose of the trust, the assets that will be placed into the trust, the beneficiaries of the trust, and the rules for distribution of the trust assets.
- Fund the trust: Transfer the assets that will be placed into the trust to the trustee. This can be done by transferring ownership of the assets or by transferring cash or other assets to the trustee.
- Obtain any necessary tax identification numbers: The trust will need its own tax identification number, and you will need to file an application for this with the IRS.
- File any necessary tax returns: The trust will need to file its own tax returns, and you may need to file additional tax forms if you are transferring assets into the trust.
- Review and update the trust document as needed: Review the trust document regularly and update it as needed to ensure that it continues to meet the needs of the beneficiaries and the grantor.
- Monitor the trust’s performance and make changes as needed: The trustee should monitor the trust’s performance regularly, and make changes as needed to ensure that the trust is operating in the best interests of the beneficiaries.
It is important to note that the process and requirements for setting up a trust can vary depending on the jurisdiction and the specific terms of the trust. It is important to consult with an attorney and tax professional who is experienced in trust law and tax laws to guide you through the process of setting up and maintaining a non-grantor irrevocable complex discretionary spendthrift trust.
Reference:
Rockefeller, N. (n.d.). non-grantor, Irrevocable, complex, discretionary Spendthrift trust.