A spendthrift trust is a type of trust set up to manage and protect assets for the benefit of one or more individuals. In involved legal contracts, the assets become separated from the beneficiary’s own estate, thus becoming safeguarded from creditors and other creditors.
The trust is put in place by a grantor, who distributes the funds and assets to the beneficiary. The spendthrift trust is designed to ensure that the assets are used for their designated purpose, and cannot be accessed by third parties, including creditors and unsecured lenders. In addition, the terms of the trust can specify that the assets must be maintained until certain conditions are met. This prevents the beneficiary from overspending or abusing the funds.
Benefits of a Spendthrift Trust
Spendthrift trusts offer numerous benefits to grantors and beneficiaries alike, most notably the protection of assets from creditors and other claimants. This is especially helpful for those who are in the process of bankruptcy, or who are facing foreclosure. The trust also allows asset protection for those benefiting from a structured settlement, alimony, or any other court ordered payments.
In addition, spendthrift trusts are often used to help manage assets for younger or elderly beneficiaries, or those who have disabilities or other health conditions. A trust can be customized with protections in place to ensure that the assets are maintained, and that the beneficiary is able to use them in the intended manner without risk of them being seized.
Conclusion
For many, a spendthrift trust can be an invaluable tool in protecting and managing assets, and must be crafted carefully for maximum effectiveness. Therefore, it is important to seek out an experienced attorney or financial planner who can ensure that an individual is using the trust in the most efficient way possible. When done correctly, a spendthrift trust can provide much needed security and protection for assets for the grantor, the beneficiary, or both.