Structuring Self-Settled Trusts for Non-Resident SettlorsStructuring Self-Settled Trusts for Non-Resident Settlors

A self-settled discretionary spendthrift (SSDS) trust is an irrevocable trust in which the settlor is allowed to designate himself a discretionary beneficiary or be so named later. The settlor may achieve a range of benefits, including the potential to access the trust’s assets, while certain creditors may have greater difficulty seizing the trust’s assets. 

It’s not uncommon to read about a planner and her client who, faced with financial stress, have been motivated out of desperation to create an SSDS trust that was bound to fail. Typically, there’s a “Hail Mary” fraudulent transfer attempt, with the trustee domiciled in the SSDS trust state, but little else existing to connect the trust to the trust state. In response, some courts have...