The Difference Between a New Hampshire and a Florida Living Trust

By Chaya Bail

The difference between a New Hampshire and a Florida living trust lies in the area of asset protection from creditors. In New Hampshire, a legally compliant living trust, in which the trust maker is also a trust beneficiary, can shield the trust assets from the trust maker’s creditors. In Florida, however, the same living trust arrangement does not provide the same asset protection.

NH Domestic Asset Protection Trust

New Hampshire authorizes the use of domestic asset protection trusts (DAPT) to protect trust assets from the reach of creditors. A DAPT is an irrevocable living trust, meaning that once the trust maker transfers legal title of assets to the trustee, the trust maker cannot get rid of the trust without the consent of the trustee and all of the beneficiaries. The trust maker cannot transfer his beneficial interest in the trust to a third party, until the trustee actually makes a payment from the trust to the trust maker. The trust maker receives payments from the trust principal only when the trustee makes such payments in his sole discretion or pursuant to an objective standard in the trust instrument. The trustee of a DAPT must be a New Hampshire resident or a New Hampshire-based bank or trust company. The trust maker cannot be the trustee of his own DAPT.

NH Shields Against Creditors

With certain exceptions, creditors of the trust maker cannot touch DAPT assets. New Hampshire law states that no lawsuit may be brought to attach DAPT property. The only way that creditors can reach DAPT assets is through the New Hampshire Uniform Fraudulent Transfer Act. If a creditor can prove that an asset transfer to a DAPT was a fraudulent transfer, as defined by the Act, the creditor may attach the DAPT assets, but only to the extent necessary to satisfy the trust maker’s debt, plus costs.

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NH Exception Creditors

There are two types of creditors that a trust maker cannot avoid paying through a DAPT. The first are individuals who are owed child support, alimony and spousal support. The second are those who are due civil damages for wrongful death, personal injuries, or property damage caused by the trust maker.

Florida Living Trust

A Florida irrevocable living trust that is analogous to a New Hampshire DAPT does not protect trust assets from the trust maker’s creditors. The same is true with a revocable Florida living trust, which is a trust that may be changed or canceled by the trust maker. Florida living trusts do not shield assets from creditors because Florida legislators have voted that a trust maker should not be allowed to place assets in a trust for his or her own benefit to escape debts owed to creditors. Consequently, with respect to a Florida irrevocable living trust, a creditor may attach the maximum amount that the trustee may distribute back to the trust maker. With respect to a revocable trust, all trust assets are subject to creditor claims, but only if such assets would not be protected by law if the trust maker owned the assets directly instead of the trustee.

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Can an Irrevocable Trust Be Pierced?

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Living Trust Protection From Creditors

A living trust is an estate planning tool that can save time and money by bypassing the probate process after the trust maker dies. Unlike a will, a trust does not require a probate court's approval or administration. Living trusts are so called because they take effect during the maker's lifetime and can be changed or revoked at any time before his death. Besides skipping probate, living trusts can protect beneficiaries from creditors. Spendthrift clauses, as the name suggests, protect beneficiaries who spend money irresponsibly and face bill collectors. Spendthrift clauses also protect beneficiaries who accumulate bills for unavoidable reasons like medical problems or job loss.

A Revocable Trust & Asset Protection

Living trusts are estate planning tools used for transferring property at death. These trusts go into effect during your lifetime and allow quick distribution of assets after your death by avoiding the cumbersome and public probate process. Some trusts offer asset protection in a variety of ways. A revocable trust does not protect assets from your creditors, but when those assets pass to your beneficiary, they can be protected.

How to Delete a Trustee From a Trust in California

A trust is a legal device that allows someone to place assets under the control of a trustee for distribution to beneficiaries. It is often used to avoid probate upon the death of the person who funded the trust, known as the settlor. If the trust is revocable, the settlor may simply revoke or amend the trust to replace the trustee. Replacing the trustee becomes more difficult, however, if the trust is irrevocable. Under certain circumstances, however, California law allows the replacement of the trustee of an irrevocable trust.

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