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Asset Protection in Williamsburg, Virginia




Asset protection

In April 2012, Governor Bob McDonnell signed Senate
Bill 11 which expanded the types of trust that are permitted to Virginia residents.   This meant that Virginia became one of only thirteenth
states in the union that permit what has come to be known as the “self-settled
domestic asset protection trusts (or DAPT).  

‘Self-settled’ because it is the
Trustmaker’s assets that are transferred to the trust; ‘domestic’ because it is
established under state law; it used to be that you had to go outside of the
U.S. to create such a trust; and, ‘asset protections’ because the primary
purpose of these trust is to do just that, provide protection for any asset
which the Trustmaker transfers to this DAPT. 
The most significant feature of this trust, and the new law supports
this, is the fact that these new Virginia
statutes will allow a Trustmaker to establish an irrevocable trust of which the
Trustmaker is a beneficiary and will also provide spendthrift protection
against claims from the Trustmaker’s creditors.

Generally, a Trustmaker establishes an irrevocable trust
to minimize the Trustmaker’s taxable estate or protect the Trustmaker’s assets
from claims from the Trustmaker’s creditors. However, only under very rare
occasions can the Trustmaker be the beneficiary of the irrevocable trust. These
rare occasions and lack of control make irrevocable trusts less attractive to
most potential Trustmakers. Virginia’s
new law makes it much more desirable to a DAPT.

Virginia’s new trust code language
is similar to the domestic asset protection trust legislation in the other
twelve states by permitting the creation of “qualified self-settled
spendthrift” trusts. The requirements to create a Virginia DAPT, include:

  • The trust must be irrevocable;
  • The Trustmaker is only entitled to discretionary distributions of income
    and principal;
  • The transfer cannot be for fraudulent reasons; and
  • Requirements that connect the trust to the Commonwealth of Virginia, like a
    Virginia trustee who maintains custody within Virginia of some or all of the trust
    property, maintains records in Virginia, prepares Virginia fiduciary income tax
    returns, or otherwise materially participates within Virginia in the
    administration of the trust.

While much of the Virginia
legislation is similar to the other states, Virginia’s DAPT legislation does have
several unique aspects to it.

  1. Virginia provides for a five-year
    period from the creation of the trust to allow creditors to make claims against
    the trust. This “claiming” period is longer in Virginia than the other states.
  2. Unlike the other states, a Trustmaker in Virginia may not retain a veto power over
    distributions.
  3. The person or entity who approves distributions must be a qualified trustee
    and, for Virginia,
    that means an independent trustee. That will exclude spouses, descendants,
    siblings, parents, employees, and entities wherein the Trustmaker controls
    thirty percent (30%) of the vote from being the trustee. Other states are less
    restrictive on the relationship of the person that can approve distributions.
  4. Only the income and principal from the trust is protected from creditor’s
    claims. Other assets in the Virginia
    self-settled spendthrift trust might not be protected from the claims of
    creditors.

Regardless, a self-settled spendthrift trust or DAPT in Virginia might be an
appropriate mechanism for those in the right circumstances.

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We've been putting together as many resources as possible so that we can continue to help:

  • If you’re a current client with a signing appointment or a prospective client with a consultation and would prefer that meeting take place in your own home, we can accomplish that with a little bit of pre-planning on our part and with the addition of a laptop, smartphone, tablet or other computer in your home to facilitate this virtual meeting. For those of you that need to sign legal documents, that too can be accomplished with the use of a webcam (FaceTime etc.), so that we can witness and electronically notarize all of your important legal documents.
  • We launched the rollout of our on-demand webinar early so that new clients and our allied professionals can view the important component parts of ‘an estate plan that works’ at their convenience.  That is available on our website.
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  • The best way to communicate with us is still by phone during regular office hours of 8:30 to 5:00, Monday through Friday, or, you can email any of our team members (that is, their first name followed by @zarembalaw.com).  We will respond to these emails as quickly as possible.
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Thank you, Walt and the Zaremba Team

Coronavirus/Covid-19
Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.