A goal of estate planning is to protect and preserve your legacy. Your estate planning lawyer at The Millman Law Group can advise you on the many ways you can keep your property and assets intact and pass them on to your loved ones. When you have a large inheritance to leave behind, you may worry about how your heir will use it. If you have that concern, setting up a spendthrift trust may be necessary to soothe your fears. Spendthrift trusts can protect your loved ones from poor financial decisions that might otherwise deplete the inheritance they generously received from your estate.
What is a Spendthrift Trust?
Spendthrift trusts limit your beneficiary’s access to assets. Instead of receiving an inheritance at once, the funds are released incrementally. This payment plan protects against bad spending habits and creditors.
Assets held in the trust belong to the trust, not the beneficiary. For example, if the beneficiary was in financial trouble, their creditors would not be able to come after the inheritance still sitting in the trust.
How Do Spendthrift Trusts Work?
Instead of passing on an inheritance to your beneficiary at once, the trust distributes the funds in increments. As the grantor or person who created the trust, you must choose a trustee. The trustee manages the trust and makes sure to disburse funds to the beneficiary per the provisions made. Some opt to use professional trustees to avoid potential familial conflicts that may make trust management difficult.
Any trust is turned into a “spendthrift trust” with the addition of a spendthrift provision. This provision states that the beneficiary may not transfer funds at once and are to receive incremental disbursements.
This type of trust is established during your lifetime in your estate plan (as a revocable trust). You then appoint a trustee to take over upon your death, as it becomes an irrevocable trust for your beneficiary.
Spendthrift Trusts vs. Discretionary Trusts
These trusts are similar but contain a crucial difference in how much control the trustee has. A spendthrift trust trustee must make disbursements that comply with the trust’s provisions, so they have very little control.
A discretionary trust, however, provides the trustee with some control. They can decide how and when funds are distributed to a beneficiary and withhold funds if the beneficiary has violated an agreement.
Your lawyer at The Millman Law Group can help you determine which trusts are best for your estate plan.
Estate Planning Made Easy With Millman Law Group
Millman Law Group, PLLC is rare because it’s one of the only law firms that offer life planning in South Florida. From life care planning to the preparation of detailed estate plans, Millman Law Group has committed to serving Floridian elderly communities in Boca Raton, Palm Beach County, Ocean Ridge, Hillsboro Beach, and many other areas since 2018. Our dedicated team also specializes in special needs trusts and catering to any age demographic because we know for certain it’s never too early to start preparing you and your family for your future. For the latest news in estate planning and elder care law, follow us on Facebook, Twitter, Linked In, and Pinterest. You can also contact us at 561-463-6480.