How Is A Special Power Of Appointment Trust (SPA Trust) Beneficial To An Estate Plan?

  • Illinois Probate Law
how is a special power of appointment trust beneficial to an estate plan | estate probate and legal group

An estate plan can include a will, durable power of attorney, healthcare directive and more. It can also have a Special Power of Appointment Trust (SPA Trust). This asset protection trust allows the holder to designate who (from a select group of individuals) is to receive assets. 

A power of appointment allows the holder to re-direct the property in a way that may be different from what you stated in the trust. But if the holder does not re-assign the assets, they will be administered as written in the trust.

A SPA Trust allows a great deal of flexibility to the person who creates it.

Why Use a Special Power of Appointment Trust?

The main advantage of the SPA Trust is the tax benefits. The holder can designate (or gift) assets to another person. The receiving person can use today’s gift tax exemptions, even when the exemptions are reduced in the future.

Another advantage is that it removes the assets from the estate before the creditors can take them. If you don’t own anything, the creditors can’t take anything. But creditors can challenge the trust if the grantor receives assets back.

An example of flexibility is that the grantor can give power to a trustee who can take actions that benefit the grantor, such as returning assets back to the grantor.

Restrictions of a Special Power of Appointment Trust

There are some restrictions to a SPA Trust. 

  • The grantor must give up control over managing the assets put in the trust.
  • The grantor cannot be a beneficiary of the trust. Meaning you cannot gift everything to yourself.
  • Creditors can challenge the trust. 

Working with an Estate Planning Attorney

A Special Power of Appointment Trust may be an excellent addition to your Estate Plan. Working with an experienced estate planning attorney will help you draft all needed aspects and ensure the documents are not contradictory to each other.

Oak Brook Estate Planning Attorney

If you have questions about Special Power of Appointment Trusts or other estate planning topics, please contact us to schedule a free consultation. To learn how an estate planning lawyer could help, call us for a consultation at 630-864-5835.

Areas we serve:  Cook, DuPage, Kane, Lake and Will counties.