How the ultra-rich use trusts to protect the family fortune if their heirs get sued or divorced
"You'd almost be negligent as an attorney if you didn't put in the trust that creditors can't get access to the trust assets," BNY Mellon Wealth Management tax strategist Jere Doyle told Insider.Spendthrift trusts can be used to defend an heir in virtually any kind of legal dispute. For example, if an heir gets in a car accident and is sued by the other party for damages, their inheritance would be protected, said Doyle.
These trusts can function as a prenuptial agreement, she said. Prenups are often done in a hurry, and some clients don't want them for sentimental reasons. They also require disclosing a lot of personal information, which heirs might not even know, in order to be enforceable. Having separate beneficiaries and trustees is just one way to strengthen a spendthrift trust's power. Cindy Brittain, partner at Karlin & Peebles, recommended having external investment advisors and professional, respected trustees. It also helps to have a business purpose for the trust, such as preserving privacy or taking advantage of another jurisdiction's tax laws, she said.
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