Person A wants to setup trust for person B, A’s goal is to protect the assets from claims against B.
B is in lower tax bracket than A. Which type of Trust shall A consider?
A) Irrevocable B) Revocable C) Discretionary
2nd question is if you are given the freedom to setup the type of trust( not limited by the above) which will you choose and why?
e.g Irrevocable Fixed trust(You are free to mix and match)
If the protection is needed for claims against A’s assets (bankruptcy), then an Irrevocable trust is fine - correct?
Discretionary as the trustee has discretion in making distributions to “B” therefore if claims were reaching “B” the trustee would not distribute cash flows to “B”, thus protecting “B”.
The answer is given discretionary , reason is similar to Rofh
Think what might play an important role is the age of the beneficiary. A minor with fixed receipts might not be appropriate. However, both fixed and discretionary provide adequate protection.