Proper estate planning provides people with the peace of mind that they need to realize that their loved ones and heirs will be provided for after the person passes on.
However, some heirs are less able to deal with financial matters than others. They could be fiscally irresponsible or have a spouse who is. They may be harassed by creditors from old debts or spend money like it grows on trees. Those scenarios are not likely to provide anyone with peace of mind. In fact, they could become the catalyst for certain nightmares.
Protect your heirs with a spendthrift trust
Not all families will require such provisions, but for heirs who do, an irrevocable spendthrift trust is an ideal way to assure that a child or grandchild has enough assets to meet his or her needs over time.
There is a secondary benefit to a spendthrift trust, and that is to protect the core assets of the trust from being collected by creditors of a beneficiary. Sometimes the most responsible of beneficiaries benefit from a spendthrift clause in a trust, as it will protect the trust from monetary judgments. Anyone could get a judgment against them, e.g., after an at-fault car wreck where another person died or was seriously injured, etc.
How to set up a spendthrift trust
If you feel that a spendthrift trust is something about which you would like to learn more, a Tallahassee estate planning attorney can explain it in detail. Below is some basic information to get you started.
Spendthrift trusts are designed to keep beneficiaries from pledging, selling, transferring or assigning any of the trust's assets. Those remain intact and protected by a trustee that the benefactor names. The trustee disburses assets on a set schedule (monthly, quarterly, semiannually or annually) or whenever significant life events are achieved — college graduations, post-graduate degrees, marriage, the birth of children, momentous birthdays, etc.
At the time that you draft your spendthrift trust, it must be designated as such. Regular trusts may also contain spendthrift clauses which may go into effect if necessary.
Drawbacks of a spendthrift trust
Depending on the intent and self-awareness of the heirs protected by the spendthrift trust, they could be either grateful or angered at the terms of the trust. Some may view it as a final attempt to control their lives from the afterlife, while others may be relieved that they now do not have to struggle to manage the trust's finances on their own.
There are also some debts from which even a spendthrift trust cannot protect its beneficiaries. Some examples include child and spousal support, should the payer fall behind in the payments. Another is debts owed to the Internal Revenue Service (IRS).
Your Florida Panhandle estate planning attorney can review your situation and recommend the best path for you to take to assure that your heirs have what they need to lead full and productive lives.