Irrevocable Trust Education & The Laws supporting the Ultra Trust^®

The Ultra Trust^® is Based on Legal Precedent and Supported by Years of Favorable Court Rulings:
The Ultra Trust® is supported by the Uniform Trust Code Section 505 and the Restatement (second) of Trusts Section 156(2) and the Restatement (Third) of Trusts Section 58(2). The majority of states have adopted some or all of these codes. Because the Ultra Trust® adapts to many different state’s codes, the Ultra Trust® works in any state in the United States. Because it is flexible, the Ultra Trust® can take advantage of the added benefits of certain states, or more conservatively, adhere to the strictest state’s rules incase the trust changes situs to a more strict state.

LAW APPLICATION OF THE ULTRA TRUST^®

The Ultra Trust^® is an irrevocable trust that includes the following features:

Creditors have no claim against the trust because no distributions can be made for the settlor’s benefit. However, the settlor may exchange assets of equal value and grant a power of appointment to another person, the Trust Protector, who could potentially provide benefits to the settlor. The cases and statutes below demonstrate that these powers of appointment do not give creditors any claim against the trust. There are no statutes, cases, secondary sources or commentaries to the contrary.

THE ULTRA TRUST^® ORIGINATED FROM CASE LAW. HERE’S WHAT WE LEARNED TO HELP YOU:

In trusts we trust, even when drunk and broke. Jane inherited a sizable amount of money from her mother. Jane was also an active alcoholic but was aware of her alcoholism. Jane had a plan. She took her inheritance and put it into an irrevocable trust, out of her own reach. She did, however, keep an income stream from the trust, but did not have access to the principal in the trust. Later, as often happens in cases of alcoholism; Jane spent all of her money and ran up significant debt. She filed for bankruptcy. The creditors attempted to have the trust included in her bankruptcy estate. The court ruled that the corpus of the irrevocable trust was untouchable by Jane and therefore untouchable by the court and creditors. They ruled that as Jane had control over the payout of 7% of the trust each year, this amount is the only amount that could be included in the bankruptcy estate. The bulk of the trust money was safe for her daughter.

You can lend a helping hand even after you are gone. Shurley’s mother and father created an irrevocable trust and funded it with land…a lot of land. Shurley also contributed a tract of land to the trust. Eventually, Shurley’s mother and father passed away and Shurley and her sister were given ½ interests in the income of the trust. Shurley and her husband fell on hard times and had to file for bankruptcy. The debtors, as they tend to do in these cases, tried to attach the trust to the bankruptcy estate. The court ruled that all of the property in the irrevocable trust that was contributed by persons other than Shurley herself were safe from being included in the bankruptcy estate. The sole piece of property that Shurley contributed was included because Texas has a statute stating that if a grantor donates assets to a trust and is also a beneficiary then the spendthrift clause is invalid towards the grantor. But, Shurley’s parents successfully protected their assets from the bankruptcy court to continue to support their children, including Shurley.

Sometimes it is better if Mom doesn’t give you any money. James filed for bankruptcy. 10 years later, a debtor attempted to attach James’s interest in a trust set up by his deceased father. The trust was irrevocable and gave James’s mother the power to distribute the corpus of the trust and/or any interest in the trust to whomever she chose as long as they were descendants of her husband. She chose not to exercise that power and distributed nothing to James. The bankruptcy court ruled that they had no authority to compel her to use that power, but only the power that James had concerning his finances. Since James could not compel his mother to distribute assets to him, neither could the court. The trust was safe.

Sometimes in marriage you can’t do anything right, except an irrevocable trust. Timothy’s mother set up an irrevocable trust with a spendthrift clause for her son that was managed by an independent trustee. Timothy was in his second marriage to a woman named Mary. Timothy had a drinking problem and sought out help. He was at AA meetings from 3-5 nights a week. Mary was not happy that he was gone so much and filed for divorce. During the divorce, she attempted to get part of the irrevocable trust. The court ruled that because Timothy had no control over the trust, there was a spendthrift clause specifically mentioning divorce and because Mary was not a beneficiary, the trust would not be counted in the marital assets. The trust was safe for Timothy’s children.

An Ultra Trust^® is better than a prenup. Prior to a getting married, Charles put a significant amount of assets into an irrevocable trust. Charles then married Melanie and they started their lives together. Eventually, the marriage failed and they ended up in court. Melanie went after the assets in the trust as marital assets. The court reasoned that the assets were not owned by Charles, had never been owned by Charles during the marriage, so they could not be marital assets. The assets were safe for Charles and his family in the safety of an irrevocable trust.

Home is where the trust is. Jerome decided to transfer all of his assets, including the home he was living in into an irrevocable trust for his children. Jerome wrote into the trust the ability to live in the home, as long as he paid for the taxes, maintenance and other items of upkeep. Jerome also had the right to force the sale of the home and the purchase of a new home by the trust. Jerome created the trust in order to protect some of the property he brought into his marriage as it was failing. Six years later, Jerome had to file for bankruptcy. The bankruptcy estate tried to have the trust included saying that the trust was a sham. The court disagreed. The court found that Jerome was not a significant beneficiary of the trust as he was basically paying rent to live in the house and was not able to take the corpus of the trust. The court also found that Gerome had no control over the trust and that the trust was set up for the benefit of the children long before he filed for bankruptcy. The court ruled that the trust was outside of the bankruptcy estate and was not created to thwart creditors. Again,

One line in the trust document can sink the ship. A woman in Wisconsin, Lucille, thought she had her Medicaid planning all taken care of. In order to pass on her and her husband’s wealth and eventually qualify for Medicaid, they gave almost all of their assets to their children who then set up an irrevocable trust for the benefit of Lucille and her husband. All set, right? Irrevocable trust: check. Drafted and funded well ahead of time: check. Well, when Lucille had to enter a nursing facility, many years after the 5 year Medicaid look back period, she was denied Medicaid because the government said that she had access to the assets in the trust. It’s an irrevocable trust, so how can that be? Well, the trust stated that the “entire corpus and income of the trust is available for [Lucille and her husband’s] support and general welfare.” It turns out that nursing home care is general welfare and the court decided in favor of Medicaid. Lucille had to spend the trust money she wanted to go to her children on her nursing home care. A poorly written trust isn’t worth the paper it’s written on. A well written trust, such as the Ultra Trust, may turn out to be priceless to you and your family.

Isn’t spendthrift an oxymoron? A debtor, James, filed for bankruptcy and the bankruptcy court attempted to include James’s contingent interest in a trust held by his mother in his bankruptcy estate. The court determined that the contingent interest was part of the bankruptcy estate. How can a trust that hasn’t even been distributed yet be included in the estate? Well, the trust did not contain a “spendthrift clause” (a clause that allows the trustee to withhold distribution in the event of debt and other contingencies) and the court determined that since James was entitled to the trust in the future that the contingent interest could be included. If the spendthrift clause were included, such as the comprehensive one found in the Ultra Trust, the money could have been withheld from the debtor and the trust assets would have been safe.

Sometimes power is not such a good thing. Wayne decided to put his assets into an irrevocable trust with a spendthrift clause. Good thinking, right? Well, many years later he declared bankruptcy and the bankruptcy estate looked to the wording of his trust. Well, he was a beneficiary of the trust and also had the power to access the principle of the trust. The state law had a rule against having a spendthrift trust that covers the creator of the trust. The court ruled that the trust was still valid; but that Wayne had access to all of the trust assets and that they would all be included in the bankruptcy estate. The trust was executed at the right time, way before there was any issues, but it wasn’t written correctly and offered no protection for Wayne.

An alter-ego trust; who knew? Jacob owed back taxes. At or around the same time that he was being informed of this, he decided to put his assets in an irrevocable trust, which included the property in which he lived. Despite having an independent trustee, Jacob lived in the property tax free and also retained control of the property. When the IRS took Jacob to court, the court ruled that Jacob still had possession and control of the property, even thought the title was in the trust. The court determined that Jacob had so much control that the trust was his “alter-ego.” Basically, the court said that despite the language of the trust document, Jacob had too much control over the assets in the trust and therefore the trust was not truly an independent entity. For this and the reasons mentioned below, the court ruled that the government could collect Jacob’s tax bill from the trust.

You can’t give something for nothing and get protection in return. Jacob’s back and still not having a good day. Jacob, when placing his assets into the trust (see above) received no compensation for the property he gave up. The court ruled that the transfers to the trust, because Jacob received no compensation, were fraudulent in nature (a fraudulent conveyance) and being so were designed to “hinder, delay or defraud either present or future creditors.” Basically, the court said Jacob could not give his assets away to avoid paying his debts. As you know from reading the ruling above, the court ruled that the government may proceed to collect all taxes from the assets held in the trust. If the conveyance had done in such a way as to avoid the label of fraudulent, such as using the proven methods of Estate Street Partners, Jacob may have preserved his trust.

Spread the money around and bring it all back together. That’ll work, right? Jerrie was set to collect a significant amount of money from his mother’s trust. Sounds great, doesn’t it? Well, Jerrie owed a large amount of back taxes and was being taken to court by the IRS. His mother’s trust didn’t have a spendthrift clause, so when the proceeds of the trust were distributed to Jerrie he decided not to report this and to try and hide it. He took the assets and spread them out among many different accounts across the country and then the assets all rejoined in a limited partnership in Nevada. Jerrie just happened to be a general and limited partner owning 96% of the partnership. The IRS connected the dots and took Jerrie to court and succeeded in getting access to the assets to pay back his taxes. When an irrevocable trust is drafted correctly in the first place there is no need to hide assets. In fact, when done correctly, hiding assets can be more of a hindrance and may even be proof of a fraudulent conveyance used against a debtor.

Put your assets in an irrevocable trust when things are smooth sailing and the court will take notice. In 1990, George and Catherine decided to transfer their money, rental properties and other assets into an irrevocable trust to benefit their children. When they did this, they did not know they were going to be audited by the IRS for back taxes. Several years later, when the IRS determined that George and Catherine owed a significant amount of back taxes from both their private accounts and business payroll accounts, the IRS tried to collect from the irrevocable trust. The court determined that the trust was not formed with the intent to deny creditors because the trust was formed before they could have known that there were any creditors. The court also ruled that the trust was totally separate from George and Catherine, because although they derived some benefit from the trust, they did not control the trust at all. The trust was controlled by independent trustees. In the end, the court ruled that the IRS could not collect from the trust and George and Catherine’s transfer of their assets to the children was safe.

Estate Street Partners offers advanced financial advice to ensure maximum asset protection from lawsuits, divorce and Medicaid spend down

The insurance man, the window guy, all those guys are not going to call you to interrupt your dinner because they buy the list from the marketing companies. If you own assets, they are going to be calling. Well, you don’t own any assets – you are asset protected. They can’t figure out who owns the assets. The lawyer is not going to sue you on a contingency basis so you are protected from lawsuits. You don’t own any assets, therefore, the likelihood that he’s going to sue you is minimal, and even if he does, the end result is that he can’t collect even though he may win the case. No lawyer will take a contingency case like that.

The Ultra Trust® irrevocable trust avoids the probate and estate tax returns

If you do estate planning properly, you don’t have any assets; thus, you don’t have to go through the probate process. Lawyers, accountants, and appraisers will not be able to earn a fee. The courts have no jurisdiction over your assets, you die without any assets and because you have no assets on the date of your death, you are ineligible. You cannot file an estate tax return. An estate tax return is filed only when you die with assets.

And again, the probate process is to determine who is going to own the assets. The estate tax is going to determine what the estate is worth, so that the government can get their fee. So, when it’s all done, between the probate and the estate tax, and the time that the probate process takes, and the amount the estate tax consumes, your heirs will not be able to get what you intended to give them, that is, if the assets are not protected.

The Ultra Trust® qualified for Medicaid help (if you avoid the five-year look back)

On the other hand, if you have no assets because you did the estate planning properly and you have set up the Ultra Trust® irrevocable trust asset protection plan then you qualify for government services such as Medicaid, provided you don’t fit in that 5 year look back period. So it’s very important that if you are in that category where you are going to become eligible for the nursing home, or if you have fathers or mothers in that position, you may not want to get involved in this new restrictive government policy about transferring those assets if applying for Medicaid; otherwise, Medicaid can impose some heavy penalties.

The Ultra Trust® is the Mercedes of asset protection and the best asset protection plan before going offshore

With the Ultra trust®, the Mercedes of asset protection, you have disqualified yourself from having people call you, from people trying to sue you, from redistributing your wealth and assets, from taxing your assets and wealth, and finally, as we have mentioned, it is a tax efficient way to transfer your wealth to the next generation (i.e. heirs and beneficiaries).

Thank you. My name is Rocco Beatrice. If you have any questions, please give me a toll-free call at (888) 93-ULTRA or (888) 938-5872. Again, we’re providing lots of information so don’t hesitate to call us.

By setting up a special needs irrevocable trust, parents of these children can create an account that will contain assets to be used to care for the special needs child after the parents pass away. One of the most beneficial ways to fund these accounts is through life insurance, using death benefits upon the passing of the parent to fund the trust for the child.

Statistics of Special Needs

Based onstatistics gathered from Cornell University, more than 2.6 million children between the ages of 5 to 15 have a disability that qualifies them as being special needs. Out of those children, 30% have multiple disabilities.

Helping Parents with a Special Needs Child

The mentioned statistics may be truly unfortunate; however, there are many advisors who are able to give advice to parents and caretakers in regards to financial planning because there are special opportunities for these children and their parents. Most parents want to take care of the child the best they can even if they are not around to do so, and this includes financially.

Financial Aid for Children Over 18

If a child reaches the age of 18 and is unable to earn wages and support themselves in a financial respect, they may be eligible to receive funds from Social Security Income. They can also be eligible to receive health services through the state in the form of Medicaid.

However, it is also possible for these benefits to end immediately if the special needs child has any assets that total more than $2,000. This does not include the ownership of a home or vehicle. Each quarter, disabled individuals are only allowed to receive $60 of unearned income. This is a government regulation. The individual must also be unable to earn more than $500 a month. This is a harsh restriction preventing the special needs child to ever be able to sustain himself/herself and makes the child completely reliant on the parent(s) and government assistance.

When special needs children turn 18, Federal assistance can be applied for and for many parents, the amount that could be received will not offer much help. In these cases, parents will continue to use their own funds and assets to provide care for the child for the remainder of their life.

About gifting to special needs children

When gifting to a child with special needs, there are some common errors that are often made. These include:

• Gifting money or assets to the special needs child directly. This could cause the financial aid to cease providing the child is more than 18 years old.
• The identical problem could occur if money is gifted after the child’s parent or grandparent has passed away.

To protect this from happening, parents who have special needs children should change where the assets of the beneficiary are assigned to. These should be immediately changed to a special needs irrevocable trust, including assets and money in IRAs and 401(k) plans.

Explaining Special Needs Irrevocable Trusts (SNTs)

When planning for the well being of a special needs child, it is important to consider the child’s welfare after the passing of the parents or the caregiver. This is one of the main fears that parents face. They often wonder who will care for the child and if the level of care will be enough to enable the child to life a fulfilling life.

To make sure that the child is, in fact, cared for in an appropriate way, a special needs irrevocable Trust can be established. To ensure that the child will be able to continue receiving financial aid, all gifts must be made to a trust in which the child is the beneficiary.

Since the assets will then be the property of the irrevocable trust and not the actual child, the assets that are located within the irrevocable trust cannot be counted as assets when considering financial aid eligibility.

How to Fund a Special Needs Irrevocable Trust

Life insurance is one of the best tools to use when looking to fund an irrevocable trust for a special needs child. This is because when the parents die, the death benefit from the life insurance policy will be in the trust without any income, gift, or estate taxes. That money will later be used to care for the child with special needs until his or her death.

In short, these trusts are irrevocable trusts and the trustee will have complete discretion on how the assets are to be used. The trustee will handle and manage all distributions from the trust. When this is done properly, all assets in the trust will be used for the caring of the child and will in no way disqualify the individual from receiving financial assistance from the state.