Protecting Trust Assets From the Federal Tax Lien

I. INTRODUCTION One common issue facing those who create trusts is how to protect beneficiaries from creditors. One of the biggest, worst creditors out there is the Internal Revenue Service (IRS or Service), wielding two weapons of mass collection: the federal tax lien and the federal tax levy. These weapons regularly pierce boilerplate spendthrift provisions. Discretionary trusts do not fare much better. Court decisions over the past ten years make…