A common occurrence while doing estate planning is when grantors want to leave specific property (money) but are worried that the beneficiary won’t use the property or spend the money wisely. One option available to the grantor is to have a spendthrift trust drafted.
A spendthrift trust is a trust that is created for the benefit of third party that gives the trustee full authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary with certain restrictions as to how the money may be spent or distributed. In simple terms, it’s a way to help protect the beneficiary if you believe they are not capable of handling the assets their about to receive. A direct benefit of setting up this type of trust is that the beneficiary cannot access the funds directly, neither can his or her creditors.
There are multiple reasons why a spendthrift trust might be useful. For example, if the beneficiary is not good with money, has an addiction, might fall into debt with creditors, or is physically or mentally unable to make good decisions.
If you do decide to have a spendthrift trust drafted, the following are questions that will have to be answered. When do you want the trust to end? Do you want any special payouts if the beneficiary encounters large expenses? How much money do you want the beneficiary to receive each month? Who do you want to be trustee and or successor trustee?
If you are thinking about drafting your estate plan, please do not go it alone. Having a good estate planning lawyer on your side is well worth the investment. We are a law practice that strives to serve you financially, personally, and professionally. Contact us today.