Why a Spendthrift Trust Can Be a Great Solution for Your Heirs
Your estate plan is made up of many smaller pieces. You can mix and match these pieces to create a personalized and comprehensive plan that fulfills your needs and meets your goals. One piece is a trust. A trust allows you to delegate authority to someone you trust (called a trustee), to manage your assets after you are gone on behalf of your beneficiaries (often your children or other loved ones). One of the great advantages of a trust is that you can personalize what it does and how it manages your assets to fit your own situation. One example of its flexibility is acting as a spendthrift trust. Today, the word spendthrift may make you think of a thrifty or frugal person. However, “spendthrift” used to mean (and this meaning is what we mean when we use the term spendthrift trust) is someone who is a wasteful spender. A spendthrift trust can protect your loved ones’ inheritance from you from creditors (divorce, bankruptcy, debts, etc.), predators (manipulative influences), and their own bad spending habits.
Spendthrift Trust Basics
Spendthrift trusts add an extra layer of protection for someone whose inheritance is vulnerable to mismanagement or outside forces.
The trust that you name has sole authority to enact distributions from the trust to your beneficiary, who then has to wait for any distributions from the trust to be able to spend money. Essentially, your trustee has the authority to say “no.” That way, the beneficiary’s inheritance is protecting from themselves and/or the world around them. The prevents the inheritance from being wasted on frivolous spending or given to someone you did not want.
Creating a Spendthrift Trust
The term “spendthrift trust” does not describe a trust that stands alone from other kinds of trust. Rather, it is called that when a normal trust has spendthrift language within it that calls upon those legal spendthrift protections. An estate planning attorney can help you determine if spendthrift language is best for your family and how to personalize it to your needs.
Estate Planning Help
Drafting a spendthrift trust can greatly increase your comfort level regarding your trust assets and what will happen to your wealth after you are gone. Many parents would not want their children to waste their inheritance or for that money to go to an ex-spouse or some kind of creditor. If you have concerns that your assets will need extra protections from a beneficiary or the world surrounding your beneficiary, contact The Rains Law Office or schedule a complimentary initial meeting to start a conversation.