A spendthrift trust is a powerful estate planning tool that can protect your heirs from creditors and help them manage their inheritance responsibly. At Heritage Law Office, our experienced estate planning attorneys will thoroughly review your needs and wants when planning your estate and provide an outline of your best options, including the creation of a spendthrift trust. Contact us either online or at 414-253-8500 to schedule a free consultation today.
What is a Spendthrift Trust?
A spendthrift trust is a type of irrevocable trust that limits a beneficiary's access to the trust funds, preventing them from spending the assets recklessly or having them seized by creditors.
Key Features of Spendthrift Trusts
- Trustee has control over the distribution of funds
- Beneficiary cannot access funds directly or pledge them as collateral
- Protects trust assets from creditors and lawsuits
Reasons to Establish a Spendthrift Trust
There are several reasons why you might want to establish a spendthrift trust for your heirs:
Protecting Heirs from Creditors
A spendthrift trust can effectively protect your heirs from creditors, as the trust assets are not considered the beneficiary's property. Creditors cannot access the trust funds to satisfy a beneficiary's debts.
Safeguarding Assets from Divorce
In the event of a beneficiary's divorce, the trust assets are protected from being divided as marital property, as long as the trust was established before the marriage.
Preventing Reckless Spending
If you are concerned about your heirs' ability to manage their inheritance responsibly, a spendthrift trust can provide them with a steady income while preventing them from squandering the assets.
Setting Up a Spendthrift Trust
Establishing a spendthrift trust requires careful planning and drafting to ensure that it effectively protects your heirs and meets your estate planning goals.
Choosing a Trustee
Selecting a responsible and trustworthy trustee is critical, as they will manage the trust assets and make distributions to the beneficiary according to the terms of the trust.
Drafting the Trust Document
The trust document should outline the terms of the spendthrift provision and specify the conditions under which the trustee can make distributions to the beneficiary. It's crucial to work with an experienced estate planning attorney to ensure that the trust document is properly drafted and complies with applicable laws.
Potential Drawbacks of Spendthrift Trusts
While spendthrift trusts offer numerous benefits, there are also some potential drawbacks to consider:
Limited Flexibility for the Beneficiary
The beneficiary has no control over the trust assets and cannot access them directly, which may be a disadvantage if they need funds for an emergency or unforeseen expenses.
Spendthrift trusts are typically irrevocable, meaning they cannot be modified or terminated once they are established. This can be problematic if circumstances change and the trust no longer serves its intended purpose.
Contact an Experienced Estate Planning Attorney
If you're considering setting up a spendthrift trust or need guidance on other estate planning strategies, contact our knowledgeable attorneys at Heritage Law Office by using the online form or calling us directly at 414-253-8500.