Spendthrift trusts: Whom do they benefit?

Some Florida residents with adult children struggle with making estate-planning decisions. For them, it’s more than deciding who gets the antique gun collection and the life insurance benefits.

They worry that the legacy they leave their adult children could wind up being their undoing. So they may put off planning the disposition of their estates, and that can also have unintended results.

Spendthrift trusts alleviate some worries

You know your children and grandchildren better than anyone. You know which ones will manage any windfalls responsibly and which ones might go on dangerous spending sprees with their inheritances. It only makes sense that you use this information wisely when designing your estate plan.

A spendthrift trust can be a good choice for those heirs who have proven to be unable to effectively manage their financial affairs. That does not necessarily mean any heirs who are struggling to meet their bills. To that end, it’s often those with the fewest resources who learn best how to budget down to the last penny in order to stay afloat.

Spendthrift trusts structure disbursements

Having unrestricted access to an inheritance is not a good option for some heirs. Any who have struggled with substance abuse, gambling or who have had to file for bankruptcy may spend themselves right into deep trouble with a large sum of money at their disposal.

You can set up the spendthrift trust with periodic disbursements, e.g., quarterly, to your heirs. These disbursements will be made by a trustee whom you appoint. Should a true emergency arise, you can include a clause that allows the trustee to provide additional funds for an approved expense.

Protect against spousal access and creditors

Sometimes, it might not be an heir that needs restricted access to wealth but the heir’s spouse. You can protect the principal of a trust from a spouse’s overspending and creditors’ grasp. Of course, once a disbursement is made to your heir, those funds could make their way into a spouse’s or creditor’s bank account eventually.

Learn more about this estate planning option

If you think that you and your heirs could benefit from the funding of a spendthrift trust, it’s a good idea to address this with your Cocoa estate planning attorney.