Exploring Civil Case Proceedings

Do You Need A Spendthrift Trust?

8 July 2022 by Becky Freeman

As far as estate planning goes, there are several types of trusts available to meet the needs of the owner. Revocable, irrevocable, pet, and spendthrift trusts are the most well-known. If you want to leave money to a loved one but are concerned that the funds could do them more harm than good, a spendthrift trust might be right for your situation. Read on and learn more.

How Does the Spendthrift Trust Work?

As with all trusts, they only come into power upon the grantor's death. Then, the appointed trustee takes over to oversee the distribution of the funds to beneficiaries. In that way, a trust works much like a will does. However, a spendthrift trust allows the trustee to completely control the inheritance regarding a named beneficiary. Total control means the funds can only be distributed under certain conditions, at certain times, and in certain amounts.

The Scope of the Trust

Trusts, in general, are amazingly flexible in the way the grantor can leave specific instructions to be followed upon their death. Below are some examples of the ways a spendthrift trust can be used to control the inheritance of a beneficiary:

1. The assets don't necessarily need to be in cash form. The trust may indicate, for example, that the trustee will pay the utility bills of the beneficiary each month rather than provide them cash.
2. The funds may be designated to be disbursed only for certain purposes such as education expenses, food, or a vacation trip.
3. Funds and assets held in a trust may be protected from the actions of the beneficiary. For instance, if the beneficiary is sued or declares bankruptcy, the assets might be protected against those actions. Speak to an estate lawyer to find out about the rules in your state on this issue.
4. The grantor can also control when the funds can be distributed. For instance, if the beneficiary lands in jail, the funds can be withheld. The funds might also be designated to be used to attend an inpatient drug rehabilitation. This can help prevent the beneficiary from having access to large sums of cash.
5. If the beneficiary tends to be gullible (easily scammed) and careless with their money, the trustee has the power to limit their funds to only the bare necessities on a monthly basis.

Speak to an estate lawyer about a spendthrift trust if you fear a loved one is unable to handle the money you leave behind. For more information, contact a law office near you.

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