Thomas Jefferson: Pioneer of Asset Protection Trusts

If Thomas Jefferson can create an asset protection trust for his daughter and son-in-law, why can’t you for your children?

As you read a section of Thomas Jefferson’s will dated March 17, 1826, copied and pasted below, you will see that he essentially considered Thomas Mann Randolph, his son-in-law, bankrupt, but still wanted to provide for him through the establishment of a trust for the benefit of his daughter Martha.

Thomas Jefferson was particularly worried about his son-in-law’s then existing creditors would take whatever property willed to him to pay debts owed. So, being a pensive attorney, he understood the laws of the day in Virginia regarding the creation of trusts and administration thereof, all for the purposes of providing for his son-in-law and daughter, and eventually for a grandson and two friends. Thomas Jefferson knew that his daughter had no creditors, and that as long as Thomas Mann Randolph stayed married to Martha that he could enjoy the property willed to him. Thomas J. Randolph, Thomas Jefferson’s grandson, and two friends Nicholas P. Trist, and Alexander Garrett were named as trustees. The trust to be established was to be administered for the life of Thomas Mann Randolph.

All of what Thomas Jefferson created was brilliant for the year 1826! Here is why. First he understood the separation of legal and equitable estates. The legal estate was vested in his grandson and two friends to manage the property during the life of Thomas Mann Randolph. The equitable, aka beneficial, portion of the trust was for the benefit of Martha. Thomas Jefferson knew that Martha and Thomas Mann Randolph would stay married despite their rocky marriage, thereby provided for his and Martha’s lifestyle during the life of Thomas Mann Randolph. This meant that creditors of Thomas Mann Randolph could not gain access to the property that he enjoyed through association with his wife Martha. Also Martha had limited rights as a woman in those days to hold property and her creditors, if any, could not gain access to the trust property. So he combined the best of the laws to working in harmony and at the same time against each other to create an asset protection trust that was essentially bullet proof. This was a hi-tech trust for its day – what else would you expect from Thomas Jefferson.

Secondly, at the death of Thomas Mann Randolph the remaining trust estate would be given to his grandson and two friends. This last conveyance in part, in today’s words, is a generations skipping trust for that portion given to the grandson. Finally, while Thomas Jefferson did not mention whether Thomas J. Randolph had creditors, he was safe in naming them as trustees because the law in Virginia at the time essentially said assets of a trust cannot be taken to satisfy debts of a trustee. That is while the title was split into legal and equitable portions.

Here is the copied and pasted portion of Thomas Jefferson’s will.

Considering the insolvent state of affairs of my friend & son in law Thomas Mann Randolph, and that what will remain of my property will be the only resource against the want in which his family would otherwise be left, it must be his wish, as it is my duty, to guard that resource against all liability for his debts, engagements or purposes whatsoever, and to preclude the rights, powers and authorities over it which might result to him by operation of law, and which might, independantly of his will, bring it within the power of his creditors, I do hereby devise and bequeath all the residue of my property real and personal, in possession or in action, whether held in my own right, or in that of my dear deceased wife, according to the powers vested in me by deed of settlement for that purpose, to my grandson Thomas J. Randolph, & my friends Nicholas P. Trist, and Alexander Garrett & their heirs during the life of my sd son in law Thomas M. Randolph, to be held & administered by them, in trust, for the sole and separate use and behoof of my dear daughter Martha Randolph and her heirs. and, aware of the nice and difficult distinctions of the law in these cases, I will further explain by saying that I understand and intend the effect of these limitation to be, that the legal estate and actual occupation shall be vested in my said trustees, and held by them in base fee, determinable on the death of my sd son in law, and the remainder during the same time be vested in my sd daughter and her heirs, and of course disposable by her last will, and that at the death of my sd son in law, the particular estate of sd trustees shall be determined and the remainder, in legal estate, possession and use use become vested in my sd daughter and her heirs, in absolute property for ever. See https://www.monticello.org/site/research-and-collections/last-will-and-testament.

The letters “sd” appears to symbolize “sine die” which means an indefinite period.

The laws in Nevada today are, as expected, much more advanced, but possess the foundation in the laws Thomas Jefferson used. Today, an individual like Thomas Mann Randolph could be named as an investment trustee and beneficiary of the trust. The “independent trustee” like Thomas J. Randolph could be named to allow or deny distributions for the benefit of Thomas Mann Randolph. Unlike the law in Virginia in 1826 that mostly was a patchwork of case law, the law in Nevada today is backed by enacted statutes that is based in sound public policy.

If you would like to find out more about protecting assets from creditors or other interested persons, please call us at (702) 202-4153. We would also be happy to share other nuances of Thomas Jefferson’s will with you.

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