Pre-Inheritance Trusts (PITs) for Asset Protection, Estate, and Tax Planning
This powerful trust allows the beneficiary receiving an inheritance to exercise control over the assets prior to the grantor's death, and insulates the assets of the pre-inheritance trust from both the grantor's creditors and the beneficiary's creditors.
The grantor, when creating the pre-inheritance trust, names the beneficiary or beneficiaries as the primary, investment co-trustee and an independent trustee as the distribution trustee. Within the trust, the beneficiary is able to create companies, invest, and generally use the assets as if they were his or her own.
The investment trustee controls how, whether, and in what assets of the pre-inheritance trust are invested. The distribution trustee controls how, whether and when distributions from the trust are made. The primary co-trustee is entitled through a power of appointment to select or change distribution trustees at will.
Because this is an irrevocable trust, the assets of the pre-inheritance trust cannot be taken by creditors of the grantor. And because the assets are held in trust and the primary beneficiary does not have the power to distribute assets from the trust, the assets of the trust cannot be taken by creditors of the primary beneficiary unless distributed. The primary beneficiary can select a new primary beneficiary to receive the assets of the trust upon their death, allowing the trust to pass through to another generation without estate taxes or creditors.
And there are ways around distribution. The pre-inheritance trust could operate a business from which the primary beneficiary is employed and draws a salary, which although subject to garnishment will not be taken lock, stock, and barrel by the creditor.