October 4, 2012
Authored by: Jordan Ware
On July 1, 2012 Virginia became the 13th state to permit a settlor to establish an irrevocable trust where the settlor is a beneficiary and can still receive spendthrift protection against the claims of the settlor’s creditors. SB 11, which was signed by Governor Bob McDonnell on April 4, 2012, expanded the number of types of permissible trusts in Virginia and added new Virginia Code Sections 55-545.03:2 and 55-545.03:3 to permit self-settled domestic asset protection trusts. The legislation is effective for trusts created on and after July 1, 2012.
Generally, a settlor establishes an irrevocable trust to minimize the settlor’s taxable estate and/or protect the settlor’s assets from claims from the settlor’s creditors. However, only under very rare occasions can the settlor be the beneficiary of the irrevocable trust. These rare occasions and lack of control make irrevocable trusts less attractive to most potential settlors. Virginia’s new law makes it