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  • Asset Protection Trust Comparison

Asset Protection Trusts compared to Estate Planning Trusts

There are several varieties of trusts. Before getting into them, let's clear up one myth:

Trusts are not "just for" the rich.

Estate planners have used trusts for estate planning for centuries. They use it to avoid the probate process and keep the extent of a family's wealth out of the court system and out of the public record. The idea here is this: because the asset is held in a "living" trust, immediately upon the death of the trust grantor the asset passes through trust to the trust beneficiaries, instead of being a part of the grantor's estate requiring probate.

Asset protection planners have also been using certain types of trusts to insulate assets from creditors. There, the idea is this: because the asset is held in an "irrevocable" and "spend-thrift" trust, it is not the debtor's to dispose of to satisfy the creditor's demands for payment.

The names of trusts are only to indicate their features and help to market them.

As such, there are a few names that are associated with failed trusts or planner-scammers. All trusts have the same basic form, with several attributes, including:

  1. Revocability: it can be revocable or irrevocable.
  2. Settlement: it can be self-settled or non-self-settled.
  3. Distributions: can be mandatory, or be in the trustee’s discretion, or use elements of both—e.g. half of the principal of the trust at beneficiary age 25, and discretionary payments throughout the life of the beneficiary.
  4. Tax effect: can be grantor (trust is disregarded for tax purposes and all effects stay with the person making the trust) or non-grantor (trust is taxed individually per the trust taxation schedules)
  5. Disclaimers are possible.
  6. Duration: may be limited to only allowing interests that vest within 21 years of a life in being at the time of trust creation, unless the jurisdiction has modified or abolished the Rule Against Perpetuities.
  7. Protectors are allowed.
  8. Spendthrift options are allowed.
  9. Powers of Appointment are possible.
  10. Beneficiaries who receive the benefit of your trust are required.
  11. Trustees (which can never be a beneficiary) are required, one or multiple.
    1. Investment Trustees, a trustee that only possesses the discretion to control how assets within the trust are used, are possible.
    2. Distribution Trustees, a trustee that only possesses the discretion to allow or disallow distributions, are possible.

The following table shows some of the more common types of trusts used in asset protection planning, and the characteristics of each.

Click on any of the trust columns to learn more about it:

Trust Name: Qualified Personal Residence Trusts (QPRTs) Pre-Inheritance Trusts (PITs) Special Power of Appointment Trusts (SPA Trusts)

Type: Irrevocable Irrevocable Irrevocable
Trustee: May be grantor in initial term Co-trustees, one of which is beneficiary Neither grantor nor beneficiary, but can be changed via power
Beneficiary: Anyone but grantor Anyone but grantor Anyone but grantor
Distribution: Discretionary strongly recommended May have mix of both, discretionary recommended May have mix of both, discretionary recommended
Purpose: Protects residence(s) and excludes value from estate Vehicle for inheritance assets that beneficiary can use to invest Protects various assets placed inside the trust


And here, common trusts used in estate planning and the characteristics of each. Click on any of the trust columns to learn more about it:

Trust Name: Living Trust Medicaid Trust Insurance Trust

Type: Revocable Irrevocable Irrevocable
Trustee: Usually grantor Never grantor Never grantor
Beneficiary: Anyone but grantor Anyone but grantor Anyone but grantor
Distribution: Generally not relevant, either is fine Discretionary recommended Generally not relevant, discretionary recommended
Purpose: Distributes assets in trust without need for probate Irrevocably holds assets in trust for rest of the family to lower assets and qualify for medicaid Holds life insurance proceeds to exclude from estate tax
Trust Name: Self-Settled Supplemental Needs Trust Third-Party Supplemental Needs Trust

Type: Irrevocable Irrevocable
Trustee: Never grantor Can be grantor
Beneficiary: Disabled grantor Disabled person, never grantor (see Self-Settled SNT to compare)
Distribution: Discretionary, per statute Discretionary, per statute
Purpose: Excludes resources from consideration for Medicaid eligibility Provides resources to enhance lifestyle of Medicaid recipient

This chart compares the features of four frequently used asset protection trusts.

  SPA Trust™
QPRT PIT DAPT
Is irrevocable
Is not self-settled
Does not have mandatory distributions
Can be a grantor trust
Can have one or more disclaimers
Is potentially unlimited in duration
Supports a protector if desired
Supports one or more powers of appointment
Does not require separate distribution and investment trustees


We can advise you which trust is right for your financial situation, and have asset protection solutions to protect any type of wealth.