Virginia’s Domestic Asset Protection Trust Legislation

Beginning on July 1, 2012, Virginia will become the thirteenth state to allow a settlor to establish an irrevocable trust of which the settlor receives spendthrift protection while being a beneficiary of the trust. Governor McDonnell signed SB 11 on April 4, 2011, adding Code sections 55-545.03:2 and 55-545.03:3 to allow self-settled asset protection trusts in Virginia. Other states to have enacted domestic assets trust protection legislation include Missouri, Alaska, Delaware, Rhode Island, Nevada, Utah, South Dakota, Wyoming, Tennessee, New Hampshire, Hawaii and Oklahoma.

The Virginia law provides a five year period during which creditors at the time of the trust creation may bring a claim—a longer period than those found in other domestic asset protection trust states. Unlike other states with domestic asset protection trusts, Virginia’s law does not allow the settler to retain a power to disapprove distributions. Additionally, under the Virginia law, only the right of the settlor to receive distributions of income and principal is protected from creditor claims and the person or entity who approves the distributions must meet the requirements for a qualified trustee (under Virginia law, this means an independent trustee).

See Virginia Enacts Domestic Asset Protection Trust Legislation, McGuire Woods, Apr. 9, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.