An irrevocable trust is an arrangement in which the grantor departs with ownership and control of property. Usually this involves a gift of the property to the trust. The trust then stands as a separate taxable entity and pays tax on its accumulated income.
A discretionary trust is a trust where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by trustor. Discretionary trusts can be discretionary in two respects. First, the trustees usually have the power to determine which beneficiaries (from within the class) will receive payments from the trust. Second, trustees can select the amount of trust property that the beneficiary receives. Although most discretionary trusts allow both types of discretion, either can be allowed on its own. It is permissible in most legal systems for a trust to have a fixed number of beneficiaries and for the trustees to have discretion as to how much each beneficiary receives.
An irrevocable trust agreement with a spendthrift provision is a legally binding document that establishes a trust, restricting the beneficiary's access to the trust principal and protecting the assets from creditors. This type of trust ensures that the assets are not easily depleted or seized, providing financial security for the beneficiary. The spendthrift provision within the trust agreement is designed to shield the trust assets from the claims of creditors. This means that the beneficiary cannot transfer or assign their right to future trust distributions, preventing creditors from accessing the funds. Instead, the trustee has full control over the distributions and decides when and how much should be disbursed to the beneficiary. There are several types of irrevocable trust agreements with spendthrift provisions: 1. Discretionary Spendthrift Trust: In this type of trust, the trustee has complete discretion over the distributions from the trust. The trustee evaluates the beneficiary's needs and circumstances and makes distributions accordingly. This allows the trustee to provide support for the beneficiary while also protecting the assets from creditors. 2. Support Spendthrift Trust: This trust agreement specifies that the trustee may make distributions to support the beneficiary's lifestyle and basic needs. The trustee determines how much support is necessary, considering factors such as housing, education, medical expenses, and other reasonable living expenses. Creditors cannot access the trust assets that are earmarked for the beneficiary's support. 3. Retirement Spendthrift Trust: This type of trust agreement is often established for the benefit of the settler or granter. It provides a source of income for the settler during retirement while preventing creditors from seizing the assets. The trust distributions are typically made in regular intervals to ensure the settler's financial stability after retirement. 4. Discretionary Support Spendthrift Trust: This hybrid trust agreement combines the features of both discretionary and support spendthrift trusts. The trustee has the authority to make distributions based on the beneficiary's needs, as well as their lifestyle and basic support. This type of trust offers flexibility while also offering protection against potential creditors. By establishing an irrevocable trust agreement with a spendthrift provision, individuals can ensure the long-term preservation and protection of their assets while providing for the financial needs of their beneficiaries. It is essential to consult with an experienced attorney or financial advisor to understand the specific regulations and requirements of this type of trust.
Para su conveniencia, debajo del texto en español le brindamos la versión completa de este formulario en inglés. For your convenience, the complete English version of this form is attached below the Spanish version.
