Spendthrift Trusts: How to Protect Someone from Themselves

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Are you concerned about leaving an inheritance to a loved one who struggles with managing money? In this article, we will discuss how to leave a gift for someone who may struggle with managing money responsibly.

One tool used in estate planning to protect individuals from themselves is a Spendthrift Trust. Let’s consider a practical scenario where someone may benefit from having one:

Imagine you have an adult son who suffers from an alcohol or drug addiction. You do not wish to disinherit him, however, you are aware that if he received a large sum upon your death he runs the risk of doing great harm to himself or others. Additionally, due to his poor judgment and addiction, he would quickly burn through the money. While you are not obligated to leave an inheritance, you want to because you love your son.

After considering the situation, it is important to understand how a Spendthrift Trust can help you. The basics of who is involved with a spendthrift trust are the same as any other type of trust. Below is an overview of each role:

• Trustor/Grantor: The original owner of the assets within a trust.

• Beneficiary: The person or people who receive the assets in the Spendthrift Trust.

• Trustee: This individual is responsible for ensuring that the trustor’s wishes are carried out according to their instructions. They also act as the intermediary between the trust and the beneficiary.

A Spendthrift Trust allows you to protect the assets inside from any creditors that may have claims against the beneficiary. You have to include a specific spendthrift provision in which you describe how the trustee will control the beneficiary’s access to the funds. The trustee can distribute funds according to a set schedule or upon the satisfaction of certain conditions.

An experienced estate planning attorney can provide valuable guidance on the types of conditions you can or cannot establish.

This article is for educational purposes only, not to provide specific legal advice. It should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.