How Does a Spendthrift Trust Work?
While you have full control and access to all your revocable living Trust assets during your life, on your death, your Beneficiaries do not have such access or control over their inheritance that is coming from your Trust.
Placing spendthrift and asset protection provisions in your Trust protects your Beneficiaries from themselves by shielding their inheritance from your Beneficiaries' own creditors. Such Trusts can be set up for the lifetime benefit of the Beneficiary, and upon the Beneficiary's death, can be set to distribute to others.
The Trustee exercises full discretion as to when, how, and how much to distribute to the Spendthirft Trust Beneficiary. If you are interested in protecting your Beneficiaries or would like to learn more about Spendthrift Trusts, we encourage you to reach out to our firm.
Interested in setting up a Spendthrift Trust? Reach out to the Law Offices of Maria N. Jonsson, PC online or by phone at (424) 383-8445 to schedule a consultation.
What Is a Spendthrift Trust?
A spendthrift Trust is somewhat different than other types of Trusts, in that an independent Trustee is granted authority on how and when to grant benefits to the named Beneficiary, as well as what amount(s) the Beneficiary will receive. The Beneficiary has no discretion as to how and when they receive distributions from such trust.
Trusts are only treated as Spendthrift Trusts if they include a spendthrift provision or clause designating them as such. These types of Trusts are irrevocable, and they are used to protect Beneficiaries that may not be able to control their spending or who have substantial debts or financial liabilities, as they significantly limit access to the intended Beneficiaries' creditors into the inheritance.
This can be an incredibly useful tool for people who do not wish to disinherit certain heirs but also want to make sure that such inheritance is not squandered by either the intended Beneficiary or their creditors.
It is important to note, however, that once assets or funds have been distributed by the Trustee to the Beneficiary, they are no longer protected; only assets/funds held within the Trust are protected.
Discuss Your Situation with Our Legal Team
If you are interested in establishing a Spendthrift Trust, the Law Offices of Maria N. Jonsson, PC can help.