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Re-examing a spendthrift trust

When it comes to the usefulness of a spendthrift trust for your beneficiaries, don’t let the name put you off. While they certainly can be used to protect your beneficiaries from some of their worst inclinations regarding money and spending, that is far from their only purpose.

Read on to learn just how a spendthrift trust could be an ideal part of your estate plan.

Protects assets from in-laws

Your beneficiary might be very good at managing their money and living within their means. But they could be married to a spouse who knows only how to fritter away money and assets. A spendthrift trust prevents their access to the trust’s principal. Of course, any disbursements that are then converted to marital assets lose that protection.

Trust is not subject to damage awards or judgments

If one of your beneficiaries were to cause a car accident where others were injured, the injured parties could sue your beneficiary (or their estate, if they were killed in the wreck). But any funds in the trust are not at risk of being seized or awarded as damages.

The funds remain protected from all creditors’ collection efforts as well. In the event that your beneficiary enters the fields of law or medicine, the trust money could never be paid out to satisfy a malpractice claim.

Good instrument for younger beneficiaries

Often, trust grantors fund trusts for young beneficiaries who haven’t yet learned how to manage their own assets and money. A spendthrift trust protects the principal from being depleted in the event that your beneficiary never develops an ability to be a good steward of their money.

All the usual protections still apply

Last but certainly not least, spendthrift trusts are still a very good way to protect beneficiaries from frittering away their inheritances. If you have an heir with a predisposition to alcoholism or drug addiction, giving them unfettered access to a large lump sum could be akin to signing their own death warrant. No one wants that, least of all you. A spendthrift trust could substantially reduce the likelihood of something like that befalling your loved ones.

Your Fullerton estate planning attorney can offer you trust options that will address your and your heirs’ unique set of circumstances. That will allow you to choose the estate planning instruments that will best meet everyone’s needs both now and in the future.

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