There are many types of Trusts that exist under the law. Trusts can be either revocable or irrevocable. A revocable trust allows the Grantor of a trust to transfer property into the trust with the unrestricted ability to undo such transfer by transferring the property from trust and even terminating such trust. In other words, the Grantor is not required to permanently part with ownership and control of property transferred into the trust. In fact, the trust terms can be amended by the Grantor as he or she deems necessary from time to time.
With regards to an irrevocable trust, once the Grantor has transferred property into the trust, the Grantor no longer retains the unrestricted right to remove such property or terminate the trust. The Grantor is unable to amend the terms of the trust.
A very powerful asset protection planning technique involves the use of the Nevada On- Shore Trust (sometime referred to as the Nevada Asset ProtectionTrust or the Nevada Self- Settled Spendthrift Trust) The Nevada On-Shore Trust is an irrevocable trust. For some, the concept of irrevocability causes some hesitations in proceeding with implementing the Nevada On-Shore Trust as part of their asset protection planning. The most often asked question by a person being introduced to the Nevada On-Shore Trust is whether or not the terms of the agreement can be amended from time to time. The answer to such question is “yes.” Although irrevocable and otherwise not amendable by the Grantor, the trust agreement usually allows for amendments or restatements to the trust agreement, including its dispositive and administrative provisions. However the Grantor is unable to make such changes directly, and most often calls for a Trust Protector to effectuate an amendment to the Trust.
A Trust Protector can be any person or institution. However, this person or institution cannot be anyone who has ever made a transfer to the trust. Thus, the Grantor cannot be his or her own Trust Protector. The Trust Protector’s powers are usually outlined with the trust agreement itself and, by way of example, often include such powers:
- The ability to remove and appoint a Trustee;
- The ability to change the location or governing law of the trust;
- The ability to remove from the trust agreement any provisions which are no longer operative in the ongoing administration of such trust due to changed circumstances;
- The ability to amend or restate the trust agreement to cope with changes in tax laws to achieve a more favorable tax status; and
- The ability to terminate the trust.
Although a trust may be irrevocable, the Trust Protector’s role affords the Grantor the ability to have a trust agreement that can change and evolve to meet the changes both to the law and changes in the Grantor’s life.