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A spendthrift trust protects your beneficiaries from themselves

| Nov 4, 2020 | Estate Planning |

You have worked hard, devoted to an industry that led to a lucrative career. Through the years, you have been able to provide things for your family that you never experienced growing up. It has been a more-than-comfortable lifestyle. Now, you hope your family can maintain that lifestyle after you die.

But you have concerns about one of your children, who subscribes to bouts of fecklessness. When it comes to handling money, she is irresponsible and foolish, buying unnecessary luxury items, gambling away great amounts of money and spending cash on things you do not want to know about. Still, you want to provide for her after you die, but, at the same time, you want to protect your assets. In such a situation, a spendthrift trust just may be the solution you and your estate needs.

Protected from creditors, too

A spendthrift trust provides a two-pronged approach toward protecting a family’s money. While the trust protects your beneficiaries’ inheritance from creditors, it also protects the beneficiaries from themselves and their poor money-managing behavior. An effective spendthrift trust prevents your beneficiaries from blowing their inheritance.

Such a trust contains detailed instructions that the trustee – the person who manages the trust – must follow. The trustee follows the guidelines in determining when the beneficiaries get their inheritance distributions. In addition, the spendthrift trust may declare limits on how often and how much money a beneficiary receives. It assures that the beneficiary does not receive all the inheritance at once.

If a beneficiary has addiction issues related to substance abuse or gambling, the spendthrift trust may include definitive instructions to halt distributions. Also, if a beneficiary’s money problems lead to credit card debt, creditors cannot get money from the trust because that money is protected.

A spendthrift trust is an effective tool that allows you to protect your assets. Your children may not agree with terms of the trust, but that is fine by you. You are only looking out for them.