What is a Self Settled Trust? A Comprehensive Legal Overview

Q: What is the main purpose of a self-settled trust?

The primary purpose is to allow the settlor to benefit from their own assets while attempting to protect them from creditors.

Q: Can I create a self-settled trust without legal help?

While it is possible to use templates, consulting a legal professional is recommended to ensure compliance with state laws.

Definition & Meaning

A self-settled trust is a type of trust where the person who creates the trust, known as the settlor, is also the beneficiary. This means that the settlor can receive benefits from the trust they established. Self-settled trusts are often referred to as asset protection trusts because they are designed to protect the assets held within the trust from creditors. However, it's important to note that many states in the U.S. do not recognize self-settled trusts for this purpose.

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Legal Use & context

Self-settled trusts are primarily used in estate planning and asset protection strategies. They can be relevant in various legal contexts, including:

Estate planning: To manage and distribute assets after death.
Asset protection: To shield assets from potential creditors.
Tax planning: To potentially reduce tax liabilities.

Users can manage some aspects of self-settled trusts through legal templates and forms available from services like US Legal Forms, but complex situations may require professional legal assistance.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A person establishes a self-settled trust to hold their investment properties, allowing them to benefit from rental income while protecting those assets from creditors in the event of a lawsuit.

Example 2: A business owner creates a self-settled trust to manage their business assets, ensuring they can receive benefits while attempting to shield those assets from potential claims against the business. (hypothetical example)

Relevant laws & statutes

Many states have specific statutes addressing self-settled trusts. For instance, Oklahoma law states:

"Nothing in this act shall authorize a person to create a spendthrift trust or other inalienable interest for his own benefit. The interest of the trustor as a beneficiary of any trust shall be freely alienable and subject to the claims of his creditors." [60 Okl. St. § 175.25]

State-by-state differences

State	Recognition of Self-Settled Trusts
Oklahoma	Not recognized
Florida	Recognized with certain conditions
Alaska	Recognized for asset protection

This is not a complete list. State laws vary, and users should consult local rules for specific guidance.

Comparison with related terms

Term	Definition	Key Differences
Spendthrift Trust	A trust that prevents beneficiaries from selling or pledging their interest.	Self-settled trusts allow the settlor to be the beneficiary, while spendthrift trusts do not.
Asset Protection Trust	A trust designed to protect assets from creditors.	Self-settled trusts may not be recognized in all states for asset protection.

Common misunderstandings

What to do if this term applies to you

If you are considering a self-settled trust, it is essential to:

Consult with a legal professional to understand your state's laws regarding self-settled trusts.
Explore legal templates and forms from US Legal Forms to assist in drafting the trust.
Evaluate your specific needs for asset protection and estate planning.

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Quick facts

Typical fees: Varies by state and complexity of the trust.
Jurisdiction: State-specific laws apply.
Possible penalties: Assets may not be protected if the trust is deemed fraudulent.