I had a client named Bill who was a wealthy physician.  In 2003, he created a 541 Trust® for his wife Jenny and their four children.

  He put $2,000,000 into the 541 Trust® where it was invested in income producing real estate.  In 2005, Bill died.  In 2007, Jenny married a successful real estate developer named Paul.  Paul needed a loan for a large project and the bank required both Paul and Jenny to guarantee the loan.  When the real estate market crashed in 2008 and 2009, the project failed.  The bank sued Paul and Jenny on their personal guaranty.  Paul and Jenny were both forced into bankruptcy.  The bankruptcy court declared that the 541 Trust® was not includible in the bankruptcy estate and that the creditors have no claim on the 541 Trust®.  The 541 Trust® is now Jenny’s only source of income.  The income and principal of the 541 Trust® is available to Jenny, but protected from her creditors or from a divorce.  When Jenny dies, the assets will be held for her children for life and they will receive the same asset protection.