Governor Deal Vetos Georgia Domestic Asset Protection Trust Bill
During this past legislative session, the Georgia General Assembly passed a domestic asset protection trust bill (HB 441) that would have allowed a grantor to transfer assets to a self-settled trust and shield such assets from some creditors. There were numerous exceptions in the legislation that would have allowed creditors to reach assets transferred to such trusts.
On May 8, 2018, Georgia Governor Nathan Deal vetoed HB 441 and issued the following veto statement:
House Bill 441 would allow for the creation and use of self-settled spendthrift trusts—also known as self-settled asset protection trusts. Under current law in Georgia, a spendthrift provision may be included in a trust instrument which, generally, can shield the assets in the trust from certain creditors of a beneficiary. However, a spendthrift provision is inapplicable to a beneficiary who is also a settlor or contributor, to the extent of the contribution to the trust. Self-settled asset protection trusts, as proposed in HB 441, would allow a person to create, or settle, a trust naming the settlor as a beneficiary, while shielding the trust assets from certain creditors. Such trusts have been subject to controversy and scrutiny due to the potential opportunity to shirk creditors while preserving the assets of the trust for distribution to the settlor/beneficiary. In a recent trend, many states have begun permitting self-settled asset protection trusts which were previously prohibited throughout the United States, though a majority continue to prohibit such trust instruments. I commend the authors for their willingness to seek input and adjust the bill throughout the legislative process, but am concerned of possible unintended consequences presented by a complex new estate planning tool. Though I do not dismiss the potential merit of these proposed trust instruments in comprehensive estate planning, I have not yet been convinced of the need for such trusts in Georgia. As a state, we want to ensure that the creditor-debtor relationship is an equitable one that facilitates economic prosperity and mobility, and self-settled spendthrift trusts—without proper safeguards—have the potential to negatively impact this balance. For the foregoing reasons, I VETO HB 441.
-- Governor Nathan Deal (R-Georgia) -- Statement on Veto Number 3
For now, domestic asset protection trusts under Georgia law will continue to be against the public policy of the State of Georgia. While there are ways to effectively use such trusts in other jurisdictions for legitimate estate planning purposes, before a grantor transfers any assets to such trusts, the grantor should seek the advice of an attorney who knows both creditor-debtor law and trust and estate law.
Brent W. Herrin is the managing partner of Small Herrin, LLP. Brent focuses his practice on Family Wealth Planning and Tax, Litigation, and Higher Education and Accreditation.
Copyright © 2018, Small Herrin, LLP and Brent W. Herrin. This article does not constitute tax, legal or other advice from Small Herrin, LLP, Brent W. Herrin, LLC, or Brent W. Herrin, which assume no responsibility with respect to assessing or advising the reader as to tax, legal or other consequences arising from the reader’s specific situation. This posting includes general information about legal issues and developments in the law. Such posting is for informational purposes only and may not reflect the most current legal developments. The reader should contact a lawyer licensed in their jurisdiction for advice on specific legal issues and should not act upon the information contained in this posting without first consulting an attorney licensed in the appropriate jurisdiction. The views set forth herein are the personal views of the author and do not necessarily reflect those of Small Herrin, LLP.