Q: My neighbor, an OB-GYN, recently mentioned that she
created a special Trust to help protect some of the assets of which
she has worked so hard to accumulate in the event her insurance is
insufficient to pay potential future malpractice claims. Is
such a Trust available in New Hampshire?
A: Yes. Until recently, it was universally accepted (at least
in the United States) that a "self settled" Trust (e.g. a
Trust funded by you with your own assets in which you are a
beneficiary) would not protect your assets from your creditors.
That has now changed.
New Hampshire has adopted the Qualified Dispositions in Trust Act,
R.S.A. 564-D, which allows you to create a self-settled "Asset
Protection Trust" ("APT") to shield Trust assets
from your future creditors, including a future spouse. The
Trust can be drafted giving the trustee broad discretionary powers
to distribute principal and income to you and your designated
beneficiaries.
As the creator ("Grantor") of the Trust, you can retain
significant control over the assets you place in your Trust.
For example, you can have the power to veto distribution
decisions to other beneficiaries proposed by the trustee. You
can act as the Trust investment advisor, reserve the right to
remove and replace the trustee or other fiduciaries, and hold a
testamentary power of appointment.
Although the statute imposes several technical requirements, they
are generally easily met. For example, a New Hampshire APT
must; (1) be irrevocable; (2) provide that the laws of the State of
New Hampshire govern the Trust; (3) contain a valid
"spendthrift clause"; and (4) provide that a New
Hampshire resident trustee serve. Also, you cannot act as
trustee.
Creditor protection is not absolute. For example, if you
transfer assets to your APT on the eve of a judgment or bankruptcy
or to avoid existing creditors, creditor protection may be
ineffective. To shield assets from existing creditors,
notice of the transfer must be given to them. Four years
after notice is given, those Trust assets will then be protected
from claims from those creditors. Without notice, assets
placed into an APT may be attached by those to whom you owe a
financial obligation at the time the assets are placed into the
Trust (i.e. existing creditors, known potential creditors, a
current spouse, etc.).
In the proper circumstances, a New Hampshire APT may be right for
you. If you have recently received a large inheritance or
windfall, own a family business, have a high risk medical or
professional practice, or have managed to acquire a nest egg, the
New Hampshire Asset Protection Trust could be an important
component of your financial and estate plans.
Published in the Manchester Union Leader, August 2015.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.