Drafting Third-Party Spendthrift Trusts after U.S. v. Harris

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by Jeramie J. Fortenberry, J.D., LL.M., and Joseph Percopo, J.D., LL.M.

Although no asset protection technique is bulletproof, third-party spendthrift trusts have long been considered to be one of the more reliable asset protection strategies. That assumption has been challenged by the recent Ninth Circuit case of U.S. v. Harris, which held that spendthrift clauses in two discretionary trusts established for a beneficiary by his parents did not protect the trusts’ assets from enforcement of a federal lien.

Harris is the latest in a line of cases that have eroded the protection provided by third-party discretionary spendthrift trusts. Attorneys, specifically estate planners, should be aware of its implications, particularly around credit protection, and adapt their drafting accordingly. Read this Insight Brief to learn more.

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