In United States trust law, a SPA Trust is an

irrevocable trust A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the " sett ...

that includes a special power of appointment. Unlike general powers of appointment, a special power of appointment is limited to a certain class of persons or entities that may receive the benefit of the power (appointee) from the person in whom the power is vested (donee). Generally, SPA trusts are used to hold property for

asset protection Asset protection (sometimes also referred to as ''debtor-creditor law'') is a set of legal techniques and a body of statutory and common law dealing with protecting assets of individuals and business entities from civil money judgments. The goal of ...

purposes, because of the benefits and control a SPA trust offers over the assets protected within the trust. The purpose of a SPA Trust is to protect assets from a person's potential future liabilities by removing the assets from the person's legal ownership. A SPA Trust is created by a legal document which is prepared by an attorney who has expertise with debtor—creditor law,

income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...

law,

gift A gift or a present is an item given to someone without the expectation of payment or anything in return. An item is not a gift if that item is already owned by the one to whom it is given. Although gift-giving might involve an expectation ...

and

estate tax An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died. International tax law distinguishes between an es ...

law, and

trust law A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the "settl ...

. The SPA Trust is built upon the following legal principles: 1. With respect to an irrevocable trust, a

creditor A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...

of the

settlor In law a settlor is a person who settles property on trust law for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the se ...

may reach the maximum amount that can be distributed to or for the

's benefit. 2. A

can retain a special power of appointment without subjecting the trust to the

claims Claim may refer to: * Claim (legal) * Claim of Right Act 1689 * Claims-based identity * Claim (philosophy) * Land claim * A ''main contention'', see conclusion of law * Patent claim * The assertion of a proposition; see Douglas N. Walton * A righ ...

of creditors.RESTATEMENT (THIRD) OF PROPERTY: WILLS AND OTHER DONATIVE TRANSFERS Section 22.1; US Bankruptcy Code Section 541(b)(1), California Probate Code Section 681; Delaware Code Section 3536; Georgia Code Section 23-2-111
New York Estates, Powers and Trusts Law 10-7.1
''See'' ''In Estate of German'', 7 Cl. Ct. 641 (1985) (85-1 USTC Par 13,610 (CCH)); ''In re Hicks'', 22 B.R. 243 (Bankr. N.D.Ga.1982); ''In re Knight'', 164 B.R. 372 (Bankr.S.D.Fla.1994); ''In re Colish'', 289 B.R. 523 (Bankr.E.D. N.Y. 2002); ''Cooley v. Cooley'', 628 A.2d 608 (1993); ''Avis v. Gold'', 178 F.3d 718 (1999); ''US v. O’Shaughnessy'', 517 N.W.2d 574 (1994); ''Spetz v. New York State Dep't of Health'', 737 N.Y.S. 2d 524 (Sup. Ct. Chautauqua Co, Jan. 15, 2002); ''Price v. Cherbonnier'', 63 Atl 209 (1906); ''Gilman v. Bell'', 99 Ill. 194 (1881); ''Jones v. Clifton'', 101 US 225 (1879); ''Holmes v. Coghill'', 33 Eng. Rep 79 (1806). By retaining a special power of appointment, the

should receive the following benefits: (1) The

can transfer unlimited amounts to the trust at any time without

gift tax In economics, a gift tax is the tax on money or property that one living person or corporate entity gives to another. A gift tax is a type of transfer tax that is imposed when someone gives something of value to someone else. The transfer must ...

consequences, (2) the assets of the trust are entitled to a step-up in basis upon the

's death, (3) the

can pay the income taxes on the earnings of the trust and allow the trust to grow tax free, (4) the

can put a home in the trust and retain all the tax benefits of home ownership if the trust is a grantor trust, (5) the trust is eligible to own stock in an S corporation, and (6) the

can change the trustees, the beneficiaries, or the terms of the trust at any time. The SPA Trust is a sophisticated and highly technical legal agreement and its effectiveness in accomplishing any particular purpose will depend upon the expertise of those who create it and the circumstances of each particular case.

References

{{reflist Wills and trusts