What Is a Spendthrift Trust?A spendthrift trust is a special type of trust in estate planning. It allows the grantor to place certain restrictions on the account to protect assets from wasteful spending or from the reach of the beneficiary’s creditors.
Spendthrift Trust BenefitsThere are many possible benefits of a spendthrift trust. The primary benefit of a spendthrift trust account, however, is that it gives the grantor peace of mind that the assets in the trust will not be squandered. It is not uncommon for grantors to set up trusts for children or grandchildren who they are concerned will not spend the money wisely. Spendthrift trusts allow these grantors to take care of their families while still providing some level of oversight as to how the money is spent.
Spendthrift trust agreements not only protect beneficiaries from themselves and their own excessive spending; they also protect them from creditors. Because the money in the trust is only earmarked for them and not owned by them, it is kept out of the reach of the beneficiary’s past creditors.
How Do Spendthrift Trusts Work?Spendthrift trusts are like other trusts in that they allow grantors to set aside money for beneficiaries. These types of trusts are different, however, in that they restrict these beneficiaries from accessing the principal of the trust all at once. Instead, payments are set up from the trust to the beneficiaries at the trustee’s discretion. Payments can be made monthly, yearly, or at any time schedule determined appropriate by the trustee. Payment schedules are just one part of the equation, though. Any number of different spendthrift trust clauses can be included in the trust agreement to maintain proper control of the assets. This is what makes these types of trusts so popular in estate planning.
Why Use An Estate Planning Attorney for Spendthrift Trusts?Spendthrift trusts can be tricky to set up because they have more complex terms and conditions than other types of trusts. They are also very versatile, so there are many decisions to be made when establishing this type of trust. For these reasons, you’ll need the help of an experienced estate planning lawyer when utilizing a spendthrift trust. The experienced law staff at Ensberg Law Group can explain the details of a spendthrift trust and help you decide whether or not this unique estate planning tool is right for you.
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