When you want to secure your estate and are concerned that your assets may be improperly managed, you might wonder, “What is the Irrevocable Spendthrift Trust?” Read more to find out.
What Is the Irrevocable Spendthrift Trust?
It’s never too early to start planning for your family’s future.
If you have questions, I’m here to help. There is no commitment and we provide free initial 15-minute phone calls. We look forward to meeting you.
The irrevocable spendthrift trust is a type of trust intended to protect a beneficiary’s interest in the trust assets when they are known to be a spendthrift, or someone who is careless with their money. This is a powerful option to protect your assets as not everyone has the self-discipline to manage vast sums of money, particularly when received as a lump sum.
In the United States, a spendthrift clause is an irrevocable trust set up by an individual who may then designate himself as the trustee even though they cannot be the beneficiary of their trust.
Purpose of a Spendthrift Clause
The purpose of these trust agreement asset protection provisions is to ensure that creditors and other persons of interest cannot gain access to the trust created by taking advantage of the beneficiary’s spendthrift status. A benefactor may include a provision for extraordinary circumstances that require the beneficiary to withdraw from the trust’s assets, such as a medical emergency.
If you are in the market for an estate planning lawyer, Paul Black is an excellent option. For years, he has been a distinguished conservatorship, incapacity planning, special needs planning, and probate lawyer working in Atlanta, Georgia.
Spendthrift Provisions in a Trust
A spendthrift clause is a provision in a trust that protects assets from a spendthrift designated beneficiary. When such a provision is in the trust document, the beneficiary’s access to the trust funds is restricted. This is specifically designed to prevent them from squandering or dissipating the funds bequeathed to them.
Still, spendthrift clauses are typically not the most appropriate way to protect assets in a trust from creditors, as this can usually be challenged and overridden in court. For instance, a trustee may have to have support obligations to a former spouse or pay child support even on irrevocable trusts.
Moreover, even if the beneficiary or trustee does not have any legal encumbrances, they can still be prevented from accessing assets held in the trust unless they have court approval. Still, spendthrift provisions have a vital place in estate planning, as they ensure the beneficiary will not have their inheritance squandered by creditors by limiting how much money someone has access to and how they can use it.
How a Spendthrift Provision Can Help Protect Your Assets
A spendthrift trust provision refers to a term found in a trust, will, or other types of estate planning documents. Spendthrift trusts make it possible to retain property in the trust by preventing the voluntary or involuntary transfer of trust property.
Beneficiaries are usually unable to transfer or redistribute trust assets unless they spend the funds for specific purposes such as the benefit of the next generation or the beneficiary’s interest.
However, it is critical to note that a spendthrift provision will not stop a beneficiary from making reasonable purchases with the assets in their care. The only thing a spendthrift trust can do is prevent them from making unwise or wasteful purchases.