A spendthrift trust is a type of trust that is designed to protect the assets of the trust from being used to pay the debts of the trust beneficiary. Spendthrift trusts are often used to protect the assets of beneficiaries who are unable to manage their finances or who may be subject to creditors’ claims.
Under a spendthrift trust, the trustee has discretion over the distribution of trust assets to the beneficiary. The beneficiary does not have the right to demand that the trustee distribute trust assets to them, and the assets of the trust are generally not subject to the claims of the beneficiary’s creditors.
Spendthrift trusts can be useful for protecting the assets of beneficiaries who are at risk of financial mismanagement or who may be subject to creditors’ claims, such as individuals who are prone to gambling or who have a high level of debt. If you are considering establishing a spendthrift trust, you should consult with an attorney or other professional to determine whether a spendthrift trust is the right choice for you and to help you navigate the process of establishing the trust.
What provisions should be in a spendthrift trust
A spendthrift trust is a type of trust that is designed to protect the assets of the trust from being used to pay the debts of the trust beneficiary. A spendthrift trust should include the following provisions:
- Appointment of a trustee: The trust should appoint a trustworthy individual or entity to serve as the trustee of the trust. The trustee will be responsible for managing the assets of the trust and making decisions about the distribution of trust assets to the beneficiary.
- Beneficiary designation: The trust should specify the individual or individuals who will be the beneficiary or beneficiaries of the trust. The trust should also specify the terms under which the beneficiary will receive distributions from the trust.
- Spendthrift provisions: The trust should include provisions that prohibit the beneficiary from selling, assigning, or encumbering their interest in the trust and that protect the assets of the trust from the claims of the beneficiary’s creditors.
- Powers of the trustee: The trust should specify the powers that the trustee has in managing the assets of the trust and making decisions about the distribution of trust assets to the beneficiary.
- Termination of the trust: The trust should specify the circumstances under which the trust will terminate and the disposition of the trust assets upon termination.
It is important to carefully consider the provisions of a spendthrift trust to ensure that it meets your needs and achieves your desired objectives. If you are considering establishing a spendthrift trust, you should consult with an attorney or other professional to help you draft the trust and to ensure that it complies with applicable laws.