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download pdfDownload PDF: Sample Asset Protection Trust; for Complete or International Members only

Non Kinetic Trust – PDF Table of Contents

  1. Interpretationpage 4
  2. Governing law and power to change it page 5
  3. Power to add and remove Beneficiaries;Settlors’ testamentary powers; page 6
  4. Power to add Excluded Person page 6
  5. Power to change the Vesting Day page 7
  6. Trust for sale page 7
  7. Power to receive additions to the Trust Fund page 7
  8. Discretionary power of appointment page 7
  9. Power to apply capital page 8
  10. Applications and accumulation of incomepage 8
  11. Trusts on Vesting Day page 8
  12. Events of duress page 9
  13. Payment to minors page 9
  14. Trustees’ powers of investment page 10
  15. Trustees’ general powers page 10
  16. Trustees’ powers in relation to land and buildings page 16
  17. Apportionment of income page 16
  18. Trustees’ dealings with third parties page 16
  19. Trustees’ charges page 16
  20. Trustees interested in companies page 17
  21. Trustees’ indemnity page 17
  22. Trustees’ involvement in managing subsidiary companies page 17
  23. Trustees not required to give security page 18
  24. Trustees’ discretion uncontrolled page 18
  25. Power to release and to add powers page 18
  26. How Corporate Trustees may act page 19
  27. Delegation by Trustees page 19
  28. Appointment, retirement and removal of Trustees page 19
  29. Protector’s powers page 20
  30. No benefit for Excluded Persons page 21
  31. Settlement irrevocable page 21

Anti-Duress Provision

Typical Duress Clause example

1. Freedom from Outside Interference

The Settlor directs that this Settlement be administered consistent with its terms, free of judicial intervention and without order, approval, or other action of any court. To the extent any Person is granted the power hereunder to compel any act on the part of the Trustee, or has the authority to render advice to the Trustee, or to otherwise approve or compel any action or exercise any power which affects or will affect this Settlement, the Settlor, Trustee and/or Protector, is directed: (i) to accept or recognize only instructions or advice, or the effects of any approval or compelled action or the exercise of any power, which are given by or are the result of Persons acting of their own free will and not under compulsion of any legal process or like authority; and (ii) to ignore any advice or any directive, order, or like decree, or the results or effects thereof, of any court, administrative body or any tribunal whatsoever or of past Trustees or of any past or present Protector hereunder, or of any other Person, where (a) such has been instigated by directive, order, or like decree of any court, administrative body or other tribunal, or where (b) the Person attempting to compel the act, or attempting to exercise the authority to render advice, or otherwise attempting to compel any action or exercise any power which affects or will affect this Settlement, is not a Person either appointed or so authorized or the like pursuant to the terms and conditions of this Settlement.

Anti Duress Explained – Video Transcript

Today, we’re going to take a look at a typical duress clause. This is a clause that’s found in almost every single asset protection trust you’ll ever see. Whether the trust is kinetic or just a typical trust. It’s often called freedom from outside interference. It seems to irritate judges less.

This is the clause that you need to be the most careful about. Why? Because this is the clause that pisses off the judges and before I even explain it in more detail, I’m just going to ask you to take a moment, let me read you the key parts.

The settlor, that’s normally my client, directs that the settlement be administered consistent with it’s terms free of judicial intervention and without order, approval or other action of any court to the extent any person is granted the power hereunder to compel any act on the part of the trustee or has the authority to render advice to the trustee or to otherwise approve or compel any action or exercise any power which affects or will affect the settlement, the settlor, trustee and/or protector is directed. He’s directed to do two things.

What powers are a settlor given through a anti duress provision?

First, one little (i), to accept or recognize only instructions or advice or the effects of any approval or compelled action or the exercise of any power which are given by or are the result of persons acting on their own free will and not under compulsion of any legal process or like authority.

So, little (i), one little (i) says hey guys, we want you all the settlor, trustee and protector to ignore anything that isn’t given from the free will as a result of a human being doing their job as expected and as retained, hired or contractually obligated.

So, basically only things on a person’s free will that are appropriate and two, two little (ii), to ignore any advice or any directive order or like decree or the results or effects thereof of any court, administrative body or any tribunal whatsoever or of past trustees or of any past or present protector hereunder or of any other person where one, see that little (i), such has been instigated by directive, order or like decree of any court, administrative body or other tribunal or where – and I’m going to move it up and center it a little bit, the person attempting to compel the act or attempting to exercise the authority to render advice or otherwise attempting to compel any action or exercise any power which affects or will affect the settlement is not a person either appointed or so authorized or the like pursuant to the terms and conditions of this settlement.

In plain English, that means that you are supposed to ignore any advice that is the result of judicial or governmental compulsion. Now, these are really powerful words. These are fighting words. You’ll soon understand that this is like putting a chip on your shoulder and daring somebody to knock it off. This is the reason why.

You should make sure that you don’t get overaggressive when you do protection. You need to verify that you have enough money both before and after you protect yourself to meet your reasonably anticipated debts. That doesn’t mean if you’re sued you can’t go ahead and plan.

But if you’re suit is worth say $100,000, leave some money unprotected. Leave some assets unprotected. Leave an old gas station. Leave some polluted land. Leave some money in another country but unprotected. You don’t have to put, you know, $100 bill on the table of your creditor’s lawyer but you do or you always should make sure you’re not pig because pigs do get eaten.

Go watch the video called “pigs get eaten”, something like that but it’s really true. This clause is usually important. It is honored by lawyers. It’s honored by protectors. In the rest of the world it’s considered normal practice to have lawyers function as protectors. Asset protection in this way is considered normal, ethical and responsible behavior by anybody with two nickels to rub together and I urge you to read this and put it away.

We’ll be getting back to it more when we talk about going to red alert status, what to do when you’re attacked and how this actually works in practice. Once we’ve gone through the structure and you have the entire structure in your head and we go to word games, this clause will make great sense to you. We’re on to our next clause commonly known as a Cuba clause.

Spendthrift Clause Explained


What is a spend thrift clause or spendthrift provision?

Today we’re talking about spendthrift clauses. They’re found in almost every trust ever done in the United States and in the English speaking world.

What I’m going to talk about is what a spendthrift clause does, why they normally are irrelevant in traditional asset protection and how if you really knew the rules and really cared about it and everybody did, how I’d be out of business and a neat little trick that’ll help you.

First off, what is a spend thrift clause?

A spendthrift clause is a provision in a trust that prevents creditors of any beneficiary from touching the assets as long as they remain in the trust. It basically disenfranchises creditors completely even in bankruptcy. They’re recognized in all 50 States. They’re recognized in England.

They’re recognized in most of the English speaking world. They’re very effective and very powerful.

But why doesn’t a spendthrift clause just protect anybody all the time?

And the reason is that spendthrift clauses do not help people who settle a self trust themselves.

It’s called the self-settled rule. If you do a spendthrift clause or spendthrift trust clause and then settle the trust yourself, it’s considered irrelevant. You’re not permitted that easy out.

That’s why we do an asset protection trust because in most of the countries that actually utilize or have decent asset protection rules we don’t even need to worry about the self-settled trust rule or the spendthrift clause protection because we don’t to rely upon it.

But just remember, you can’t do it for yourself. You can do it for your kid. You can put a simple spendthrift clause in any trust you do for anybody else it just can’t help you and how they would put me out of business if properly used in most estate plans.

An Example of a Spend thrift Clause in a Asset Protection Trust

Ok look, let’s just say you’re going to inherit $100,000 from your parents. If they give you the money and then you put it into trust, your trust doesn’t get the benefit of a spendthrift clause. Your trust is pierceable, typical estate planning trust that can sometimes become a permanent after death oftentimes will give the beneficiary spendthrift provision, spendthrift protection if done correctly. It doesn’t work if you get the money out of trust. So, what do you do?

You always make sure that if you’re going to give somebody money or if your parents are somebody who’s going to give you money, that they put it into trust and then allow you to become the trustee of your own trust when they die or when they want to make the gift. Rather than giving it to you outright and having you put into trust thereby making it so you can’t advantage of the spendthrift clause protection.

If they put it into a trust first and you just become trustee over your own trust, you’re double protected. You get the benefit of a spendthrift protection. I would be out of business. People would not need to do asset protection planning except in rare cases if everybody who willed or gave, excuse me, anybody who gave anybody any money, did so in trust and simply made the person to whom they’re giving the assets the trustee of this trust.

Now, I’m going to show you a sample clause, a very very simple one. This is a typical spendthrift clause. Let me read part of it to you. No discretionary beneficiary of this trust including but no limited to the settlor shall have the power to anticipate transfer, sell, basically give the stuff away or encumber any payment or distribution of either principal or income. This is a lot of words.

I’ll let you see the whole thing. You can read it carefully on your own but basically it says that your creditors are out of luck if they want to take any of the assets held in trust from you, very powerful provision.

I once saw a guy put a lot of money in trust for his teenage children. The oldest child went and bought a $400,000 Ferrari by promising the Ferrari dealer a portion of the proceeds he had in trust and proved that he had it in the trust. He took delivery of it and my client basically said you’re not getting any money. The Ferrari dealer didn’t get paid.

My client’s son got to keep his money and that’s how it works. It basically disenfranchises creditors and thank God for me because I wouldn’t have any asset protection work to do. Thank God for me most of you don’t take advantage of this when you will or giving the assets the away when you – it doesn’t really work by will so well because you have to actually put into trust but don’t forget the incredible power of the spendthrift clause.

You should put them in all asset protection trusts even though they don’t benefit you because if the trust is done correctly, it will benefit your beneficiaries, the people that survive you. They will have double protection both from the asset protections aspects of the trust and because of this simple little 150-word spendthrift clause. Don’t ever forget it. It’s a good thing to know about.

Typical Spendthrift Clause from Asset Protection Trust

(*The excerpt below is an actual example of a Spendthrift Clause from an example Asset Protection Trust)

No Discretionary Beneficiary of this Trust, including but not limited to the Settlor, shall have the power to anticipate, transfer, sell, assign or encumber any payment or distribution of either principal or income to be made under the provisions of this Trust, and any anticipation, transfer, sale, assignment or encumbrance by any such Discretionary Beneficiary, whether of principal or income, whether by voluntary act or by operation of law, shall be void and of no effect whatsoever, and no distribution or payment shall be made by the Trustee to any creditor, assignee, receiver, referee in bankruptcy, or trustee in bankruptcy of any such Discretionary Beneficiary. If, notwithstanding the above, it shall be held that the interest, whether of principal or income, of any Discretionary Beneficiary under this Trust has vested in any third party, whether by voluntary transfer or by operation of law, then, to the extent of such vestment, such interest shall cease and the Trustee shall thereupon apply any payment or distribution, whether of income or principal, thus attempted to be sold, transferred, assigned, levied upon, or taken, to the use of the Discretionary Beneficiary who would have been entitled thereto in the absence of such sale, transfer, assignment, levy or taking.

Cuba Clause & Definition of Event of Duress

Typical Cuba Clause

This is an example of your typical Cuba Clause & Definition of Event of Duress in a asset protection trust.

Change of Trustee and Situs of Administration
(a) Notwithstanding any other provision contained in this Settlement, the Trustee, upon the happening of an Event of Duress in the jurisdiction where any Trustee or part of the Trust Fund are located, or for any other reason with the written consent of the Protector, may change the situs of any management, control and administration of the Trust Fund from the jurisdiction having the Event of Duress to the place in which the remaining Trustee shall for the time being reside.

(b) The Trust Fund so transferred shall be held in Trust and shall be subject to the same provisions declared and contained in this Settlement except for any changes the Trustee in its discretion deems necessary pursuant to the powers to amend contained in this Settlement.

(c) Any Trustee, when called upon to do so by a remaining Trustee or the Emergency Trustee, shall execute all documents, deeds and contracts and do all things as shall be necessary in order to perfect the title of the Emergency Trustee to the Trust Fund.

(d) Upon the transfer or deemed transfer of the Trust Fund pursuant to the terms of this Clause, the retiring Trustee shall be indemnified by any Trustee then in office or by the Emergency Trustee from and out of the Trust Fund in accordance with the terms of this Settlement.

(e) The Emergency Trustee, on the transfer to the Emergency Trustee of the Trust Fund or any part thereof, shall for the purpose of this Settlement constitute the Trustee of this Settlement. Upon the occurrence of any transfer or deemed transfer of the Trust Fund, the Trustee then in office shall give notice to the Protector of such transfer or deemed transfer.

Event of Duress means the occurrence of any of the following: (i) War or civil disturbance which will or may endanger, whether directly or indirectly, the safety of any monies, investments or property which may from time to time be included in or form a part of the Trust Fund;

(ii) Political action in any part of the world, whether instigated by any government, political organization or individual, whether constitutional or otherwise, which will or may endanger, whether directly or indirectly, the safety of any monies, investments or property which may from time to time be included in or form a part of the Trust Fund;

(iii) The enactment in any part of the world of any law, regulation, decree or measure which will or may directly or indirectly, expropriate, sequestrate or in any way control, restrict or prevent the free disposal by the Trustee of any monies, investments or property which may from time to time be included in or form a part of the Trust Fund;

(iv) Action or threat of action by any government, department or agency in any part of the world or by any official purporting to act on the instructions and with authority of such government, department or agency, which will or may, directly or indirectly, expropriate, sequestrate, levy, lien or in any way control, restrict or prevent the free disposal by the Trustee of any monies, investments or property which may from time to time be included in or form a part of the Trust Fund;

(v) Any order, decree or judgment by any court or tribunal in any part of the world which will or may directly or indirectly, expropriate, sequestrate, levy, lien or in any way control, restrict or prevent the free disposal by the Trustee of any monies, investments or property which may from time to time be included in or form a part of the Trust Fund and any distribution therefrom.

pdf downloadDownload PDF: Cuba clause & Definition of event of duress

Contest Clause

Example Contest Clause

If any Person, including a Discretionary Beneficiary shall, in any manner, either:(i) directly or indirectly, attempt to contest or oppose the validity of this Trust, or anyother Trust settled, on or after the date of this Settlement, by the Settlor, the Spouse
of the Settlor, or both, or

(ii) commence or prosecute any legal proceedings to set such Settlement(s) aside orchallenge the exercise of fiduciary authority by the Trustee or the advice of the Protector pursuant to such Settlement(s) then, in such event, such Person shall forfeit his, her, or its share, cease to have any right or interest in the Trust Fund, and shall be deemed to have predeceased both the Settlor and the Spouse of the Settlor. The Trustee may, if in its sole and absolute discretion, it deems it reasonable, consider such an attack upon this trust or any of the above described Settlement(s), an Event of Duress.

pdf downloadDownload PDF: Contest clause

Getting Assets Out of APT During Settlor’s Life


Trustee

The Trustee shall stand possessed of the Trust Fund for the benefit of all or any one or more of the Discretionary Beneficiaries and with such powers of appointment, maintenance and advancement in favor of all or any one or more of them, as the Trustee, with the written consent of the Protector, may in its discretion think fit.

Settlor

During the lifetime of the Settlor the Trustee shall distribute the Trust Fund or any part thereof to such one or more Discretionary Beneficiaries, on such terms and conditions, either outright or in trust, as the Settlor may from time to time appoint by a signed written instrument delivered to the Trustee, with such instrument specifically referring to and exercising this power of appointment.

Coordinating Your Asset Protection Trust With Your Estate Plan or Will



Coordinating Your Asset Protection Trust
With Your Estate Plan

(If You Are Doing Your Estate Planning With An Estate Planning Trust)

Provided that the Settlor has actually settled an estate planning trust (hereinafter Settlor’s Estate Planning Trust) specifically directing that Settlor’s Estate Planning Trust control the disposition of the Trust Fund, the Trustee shall distribute such portion to the Trustee of Settlor’s Estate Planning Trust, as amended, to be held, administered and distributed in accordance with its provisions.

Notwithstanding the foregoing, the Trustee may, with the consent of the Protector, defer distributions to the Trustee of Settlor’s Estate Planning Trust if such delay would be necessary to protect the deceased Settlor’s account from claims of his or her creditors.

In case of such delay, the Trustee shall continue to hold the Settlor’s account, in trust, and administer and distribute it in accordance with the provisions of the Settlor’s Estate Planning Trust as amended as of the date of the deceased Settlor’s death as if the terms of said Trust were set forth herein.

Coordinating Your Asset Protection Trust With Your Estate Plan with Settlor’s Will

(If You Are Doing Your Estate Planning With A Will)

Upon the death of the Settlor, the Trustee shall distribute the Trust Fund or any part thereof to such one or more Discretionary Beneficiaries, on such terms and conditions, either outright or in trust, as the Settlor may appoint by an instrument in writing (including without limitation a Will or a Codicil) signed by the Settlor and delivered to the Trustee, specifically referring to and exercising this power of appointment.

Notwithstanding the foregoing, the Trustee may with the consent of the Protector, defer any distributions pursuant to such power of appointment if such delay would be necessary to protect the deceased Settlor’s account from claims of his or her creditors.

In case of such delay, the Trustee shall continue to hold the deceased Settlor’s account, in trust, and administer and distribute it in accordance with the provisions of such power of appointment as of the date of the deceased Settlor’s death as if the terms of said power of appointment were set forth herein.

Coordinating Your Asset Protection Trust With Your Will

(If You Are Doing Your Estate Planning With A Will)

Upon the death of the Settlor, the Trustee shall distribute the Trust Fund or any part thereof to such one or more Discretionary Beneficiaries, on such terms and conditions, either outright or in trust, as the Settlor may appoint by an instrument in writing (including without limitation a Will or a Codicil) signed by the Settlor and delivered to the Trustee, specifically referring to and exercising this power of appointment.

Notwithstanding the foregoing, the Trustee may with the consent of the Protector, defer any distributions pursuant to such power of appointment if such delay would be necessary to protect the deceased Settlor’s account from claims of his or her creditors. In case of such delay, the Trustee shall continue to hold the deceased Settlor’s account, in trust, and administer and distribute it in accordance with the provisions of such power of appointment as of the date of the deceased Settlor’s death as if the terms of said power of appointment were set forth herein.