One of the most effective tools for protecting, preserving and passing on wealth to heirs is the spendthrift trust. This type of trust contains clauses specifically aimed at preventing beneficiaries from squandering their inheritance. People who want to leave substantial amounts of money to their adult children or grandchildren, but do not trust them to manage it wisely, often use spendthrift trusts.
ADVANTAGES OF SPENDTHRIFT TRUSTS
- A spendthrift trust is a good way to provide lifetime income or financial support to a beneficiary that lacks the ability to manage money or property. Depending on the heir, it may be wise to avoid leaving a lump sum inheritance.
- A spendthrift trust can be a way to protect assets of a beneficiary that has claims against their property and income due to lawsuits, alimony, medical bills and other unpaid debts.
- The beneficiary of a spendthrift trust is prohibited from selling, assigning, transferring or pledging the trust assets so it provides the grantor or settlor some assurance that the beneficiary’s financial needs may be met for a longer period of time.
- Because assets passed to a beneficiary through a trust avoid the public process of probate, the inheritance you leave for your children in this type of trust should be more private than if those same assets passed via a will.
Spendthrift trusts are complex instruments that must be properly drafted, funded and administered to be enforceable and accomplish the goals of the person making the trust. If you are considering using a spendthrift trust, contact The Law Offices of Justin M. Gilbert.