A spendthrift trust is a unique trust that gives an independent trustee complete control over trust funds that are to be distributed to a beneficiary or used for their benefit. This is an excellent trust to give to those who may spend money quickly or on things you don’t want them to buy, for example.
Spendthrift trusts don’t give your beneficiaries direct access to funds. Usually, one or more trustees works to decide on how to distribute the funds to help care for the beneficiary. For example, a mother leaving behind a spendthrift trust may say that the trust can’t be used on buying cars above a certain value but can be used in full to pay for schooling.
What’s the biggest benefit of the spendthrift trust?
One of the main benefits of a spendthrift trust is that it shields money from creditors. The funds in a trust technically belong to the trust, not to anyone else. Therefore, creditors cannot make claims against them.
Why is that important? Think about this: If your beneficiary takes out a loan that they can’t pay off and goes to collections, the collection agency won’t be able to take money from the trust to cover the debt.
If you are interested in setting up a spendthrift trust, your attorney can talk to you more about what you need and how long it will take to set up. This can be a highly beneficial trust and one to consider carefully, especially if you are concerned about your beneficiary and how they may exhaust the trust too quickly.