How can trust assets be protected from creditors?
Trust assets in North Carolina can be protected from creditors by utilizing certain provisions of state inheritance laws. The primary provision is the North Carolina Uniform Fraudulent Transfer Act (NCUFTA), which covers situations in which the settlor of the trust transfers assets to a trust with the intent to defraud, hinder, or delay creditors. To use this provision, the settlor must have transferred the assets to the trust before any of his/her creditors had a claim, or the settlor must have known about the claim when they transferred the assets. In addition, under North Carolina Trust Law, the settlor may designate the trust assets as exempt from the claims of creditors. This exempting of assets may come in the form of a trust agreement where the settlor specifically designates certain property (such as cash, securities, real estate, artwork, etc.) for exempt status. When assets are designated for exempt status, the trustee of the trust must act in accordance with the terms of the trust agreement in order to protect the trust assets from creditors. The settlor may also use the North Carolina Spendthrift Provisions to protect trust assets from creditors. Under this provision, the trust assets are protected from creditors until the trust beneficiary is the outright owner of the assets. The settlor of the trust must designate the trust as a spendthrift trust in the trust agreement and the assets must be held in the trust until the trust beneficiary is the outright owner. In summary, trust assets in North Carolina can be protected from creditors by utilizing certain provisions of state inheritance laws, such as the North Carolina Uniform Fraudulent Transfer Act, exempting certain assets in the trust agreement, and establishing a spendthrift trust.
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