Most people spend their productive years amassing wealth to guarantee the financial wellbeing of their heirs. Even so, some beneficiaries will lose it within a short period. In most cases, the excitement associated with coming across a large sum of money might leave someone spending it on everything they might have wished for but do not necessarily need. Other heirs get the wrong advice and sink their money into the wrong investment and lose it.
A family law firm based in Townsville or wherever you live, fortunately, has the best solution for your estate planning to address these concerns, and that is a spendthrift trust. This type of trust is, however, relatively new. You might not know what it is and how it applies to your estate planning. The following guidelines will help you understand it better.
What Is a Spendthrift Trust?
A spendthrift trust is an irrevocable living trust. You will have to appoint someone else as its trustee. Moreover, you cannot relinquish or change your mind about the trust’s provision in the future. Unlike other trusts, a spendthrift trust continues even after a grantor’s death. It keeps holding the grantor’s assets for an incremental distribution to their heirs. An attorney will include a spendthrift clause in your trust using specific terms for it to become legally enforceable.
What are the Provisions of the Trust?
A spendthrift trust prevents the distribution of all your assets to an heir in one go. This is an ideal option if you are apprehensive about the beneficiary might mishandle the assets or have numerous creditors that could take the windfall.
With a spendthrift trust, the inheritance is distribution in set portions over a long period. Heirs cannot spend any cash before its distribution. Furthermore, creditors only have access to the distributed portions and not the entire amount in your trust since a beneficiary is also barred from promising the trust’s payments to someone else. The discretion of the amount and frequency of payments is left to a trustee or can be spelled out by the grantor in the trust’s documents.
What are the Legal Rights of Your Beneficiary?
With a spendthrift trust, your recipient has legal rights to get information on the trust, including its administration or distribution. They will get a detailed accounting report of the trust and payments as stipulated. A beneficiary can also petition for a trustee’s replacement or removal if they deem that the trustee is not acting with their best interests in mind.
Invasion of the Trust
Despite your best efforts, your beneficiary might expose the trust to other parties who would access the money for specific payments. This is known as the invasion of a spendthrift trust. The common reasons for invasion include unpaid child support or alimony and federal and state debts and payments the beneficiary needs to settle.
With these tidbits, you now know what to expect from a spendthrift trust. The law surrounding the setting and working of the trust nonetheless differs among states. You should work with different professionals to guarantee that the trust favours your heirs.