You may be lucky enough to let your desired beneficiary inherit considerable assets. However, you may be nervous about them receiving this large gift, especially if they have never had or handled high-value and complex assets like this before. Well, in a case like this, distributing through a trust may be more appropriate than a will. To take it one step further, though, you may add a spendthrift trust clause here. That said, please read on to discover more about a spendthrift trust clause and how a seasoned Broward County trust lawyer at The Probate Lawyers can help determine whether this works in your beneficiary’s best interest.
What is a spendthrift trust clause?
In your spendthrift trust clause, you instruct that your named beneficiary has restricted control over its assets. That is, they cannot transfer the assets held in the trust into their possession. They also cannot sell, assign, or encumber their interest in the trust.
Rather, this clause has your appointed trustee distribute these assets in small increments over time. It may also instruct that, once these assets are distributed to your beneficiary, they can only use them in certain ways or for certain things. For example, you may order that your trustee only gives these assets to your beneficiary when needed, and nothing more than the amount needed, to pay for essential expenses (i.e., monthly mortgage payments, utility bills, tuition expenses, grocery bills, etc).
In what ways can a spendthrift trust help my beneficiary?
Overall, a spendthrift trust may protect your named beneficiary from themselves. This is particularly relevant if they have a known history of financial mismanagement. To reiterate, as a grantor of this trust type, you may control how your beneficiary’s inheritance is staggered and what exactly they spend their inheritance on. In this way, you may work to ensure it lasts for the long haul and not be wasted instantly on poor spending choices.
With your beneficiary’s money troubles, you may unfortunately anticipate them having trouble with creditors in the future. So, this trust type may be used as a precautionary tool because your beneficiary’s creditors may be blocked from collecting funds held within it. This is because, technically, a trust is a legal entity separate from your beneficiary. Similarly, these assets may be safeguarded should your beneficiary be driven to file for consumer bankruptcy one day.
Lastly, it is worth mentioning that this trust may bypass the probate process and other imposed federal estate taxes. Again, this may have your assets financially support your beneficiary for as long as possible, along with allowing them to access their first incremental payment sooner. Importantly, this is so long as you make sure to establish this trust during your lifetime.
To give yourself enough time to develop a solid estate plan, please be sure to get in touch with a competent Broward County trust lawyer from The Probate Lawyers as soon as possible. We look forward to hearing from you.
