How can trust assets be protected from creditors?
Trust assets in West Virginia can be protected from creditors through the establishment of a trust. Trusts can be created either during a person’s lifetime or through their will. A trust is a legal arrangement whereby a person or entity, called the grantor or settlor, transfers ownership of assets to a trustee, who holds and administers the assets for the benefit of a beneficiary. When assets are placed into a trust, they no longer belong to the grantor. The trustee has the legal authority to manage the trust assets according to the grantor’s instructions set out in the trust document. Since the trust is a separate legal entity, these assets would not be available to creditors who make claims against the settlor. In West Virginia, certain types of trusts, such as spendthrift trusts, can help protect trust assets from creditors. Spendthrift trusts are established specifically to protect assets against the settlor’s creditors. This kind of trust provides that the trust assets can only be used for the benefit of the beneficiaries designated in the trust document. They cannot be used to pay creditors of the settlor. Trusts can also be structured to take advantage of tax laws. For example, trusts can be set up to pass assets to beneficiaries free of estate tax. The tax laws in West Virginia can also be used to shelter trust assets from creditors. As long as the trust is properly structured and all applicable tax laws are complied with, the trust assets should be protected from creditors.
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