The older you get, the more you think about your life and legacy. Over the years, you’ve worked hard and have gained a large amount of wealth. You’re in good health, but you’re well aware that death is inevitable and can happen at any time. Knowing this, you want to plan for your family’s future. After some planning, you decide to leave a young grandchild with a large sum of money. You want to ensure that they have a safe and happy future. Namely, you want to fund their education so they can one day pursue their dreams, whatever their passions may be.
You consider creating a trust, but you’re worried that once your grandchild is older, they’ll misspend the money. You remember what it was like to be young and bright but also irresponsible with finances. If you’re worried about a beneficiary not using your trust money well, you might consider setting up a spendthrift trust. A spendthrift trust protects the beneficiary from spending the trust property unwisely and from their creditors.
Do you want to create a spendthrift trust? If so, contact a Cary spendthrift trust lawyer at Cary Estate Planning today. Call now to schedule your free consultation.
A spendthrift trust is an asset protection trust that essentially restricts the beneficiary’s access to the funds so they can only use them for expenses the grantor outlines in the trust. There are three main components involved in a spendthrift trust:
The purpose of a spendthrift trust is to provide assets to a beneficiary who may be irresponsible with money. For example, the beneficiary might be too young or maybe they have been careless with finances in the past. A spendthrift provision is a perfect solution for grantors who want to protect a loved one’s future but are worried about the beneficiary’s ability to handle the money.
The primary benefit of a spendthrift trust is to protect a beneficiary from wasting their funds. A traditional trust grants the beneficiary access to the trust funds. This means they can use the assets however they want. Spendthrift trusts are asset protection trusts, and they are a beneficial option if you want to ensure that the trust funds are spent exactly how you intend for them to be used. The other advantage of creating a spendthrift trust is that the beneficiary’s creditors cannot access the funds. The funds technically belong to the trustee, not the beneficiary, which means creditors can’t demand the beneficiary to use the trust to pay whatever the beneficiary owes the creditor.
Spendthrift trusts offer protection for the assets that you want to give to a beneficiary who may not be able to handle the money. You could have many reasons for doing this. Maybe the beneficiary is young, or they have a history of being irresponsible with money. Maybe you’re worried that the beneficiary has creditors who will take advantage of your funds if you create a traditional trust. Whatever your reason or situation, a spendthrift trust could be your best option. At Cary Estate Planning, we understand that your assets and, more importantly, your family is worth protecting. We can help you set up a spendthrift to secure your beneficiaries’ futures. Contact us today to schedule a free consultation so we can get started on your spendthrift trust work in North Carolina.
Is a spendthrift trust an irrevocable trust?
A spendthrift trust can either be irrevocable or revocable. An irrevocable trust cannot be changed once legally established, while a revocable trust can be changed. This is up to your discretion as the grantor. Revocable trusts are more flexible, but irrevocable trusts offer more protection against creditors.
How do you create a spendthrift trust?
First, you need to hire a spendthrift trust lawyer. The lawyer will ask you how you want to set up your trust. For example, they might ask when you want the trust to end or what you want to accomplish with the trust. Then your lawyer will guide you through the process of creating the trust.
Who should utilize a spendthrift trust?
Anyone can use and benefit from a spendthrift trust. However, it may help people who want more control over how their assets are spent. For example, if clients only want their beneficiary to spend the money on buying a house or their college education, they can define that in their trust. The beneficiary won’t be able to spend the money however they want, and the trustee ensures that the money is used correctly.