Irrevocable Trust

[archived_user]

This is question 13 in CAFI mock 2. My question is, had the trust been revocable, would anyone other than Bryn be able to claim on the trust?
Q. If Paolo had predeceased Bryn, the life insurance proceeds would most likely have been paid to:

1. Bryn.
2. Kasey.
3. the University of Izlandia.

Solution
C is correct. The trust was irrevocable so neither Bryn (while alive) nor his wife would have a claim on any of its assets including the life insurance policy or its proceeds. Had Paolo predeceased Bryn, the proceeds of the life insurance policy would have been paid to the remainderman on Bryn’s death, i.e., to the University of Izlandia

 

[archived_user]

Maybe. When the settlor (the person who puts money in the trust) transfers funds to a revocable trust they are still considered to be the legal owner of those assets. Therefore a revocable trust provides no creditor protection.
While the assets in a revocable trust will bypass the estate upon death and be distributed to the trust beneficiaries, a former spouse - or anybody else for that matter, could make a claim against the assets. An irrevocable trust would solve this problem.

 

[archived_user]

Thank you for the prompt reply but my question is that can anyone other than the beneficiaries or the grantor claim any right. For example a spouse can claim a right in the trust incase the latter is not one of the beneficiaries.

 

[archived_user]

That’s exactly what I said
Anybody can make a claim at assets held in a revocable trust against the grantor (settlor) because the grantor is still the legal owner.
If the money was in a revocable trust and the spouse is not a beneficiary of that trust, she/he can still make a claim against those assets.
If the trust was irrevocable no claims could be made by the spouse or anybody else. The assets in the trust belong the beneficiaries of that trust. And in actual fact, the trustee of an irrevocable trust is the legal owner of the assets in the trust - hence the beneficiaries receive full creditor protection since they do not “own” the assets.
That last point may be overkill but that’s how it works.