Asset Protection for Business Owners and High-Income Earners by Alan Northcott
Author:Alan Northcott
Language: eng
Format: epub
Publisher: Atlantic Publishing Group, Inc.
Published: 2009-06-15T00:00:00+00:00
CHILDREN’S TRUSTS
As with the ILIT, we are now considering trusts established for specific purposes or assets. The irrevocability principle for asset protection applies to any established for this purpose. If the trust is revocable, then you as settlor still have a means to access the funds, and that means your creditors can make you do so.
An irrevocable children’s trust (ICT) gives you asset protection, and can also have tax benefits. If you transfer assets to this type of trust they are protected from your creditors and they are no longer part of your taxable estate. Any income generated by the assets would be taxed at a lower tax rate, as it would count as your children’s.
The terms of the trust, which is in accordance with Section 2503 Minor’s Trust, ensure that the assets are not touchable by you or your creditors, and by the child beneficiary while under the age of 21. The only drawback to this arrangement is that the funds are available to the child when they are 21, which you may still consider too young for responsible behavior, depending on the child. As it is irrevocable, you as settlor or grantor can have no further say in the disposition of the assets, and can only ask the 21-year-old for his or her consent to leave the assets in trust.
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