Spendthrift Trust In California

What is a spendthrift trust?

A spendthrift trust keeps the beneficiaries from going broke long after you are gone. It is a type of Trust set to specifically protect and preserve your estate in the hands of a trustee, such that beneficiaries only earn income from it. They don’t get to touch the assets.

A spendthrift trust is an advanced estate planning tool that addresses your inheritors’ financial savviness concerns. Besides keeping the wealth safe from the extravagant family members, the spend trust guards your money against creditors.

If your heirs run into debt in the future, the estate will be out of bounds from the creditors. The same applies to plaintiffs in lawsuits such as ex-spouses in divorce cases.

A spendthrift trust is an irrevocable type of living Trust set up by a grantor (you) and overseen by a trustee (a person or organization that you assign the fiduciary responsibility to manage your wealth) for the benefits of your beneficiaries (sons, daughters, and others loved ones).

Traditional trusts end once you die, and your wealth gets distributed to your beneficiaries. On the contrary, a living trust is not wrapped up after your death. The trustee continues to administer your wealth per your set rules on behalf of the beneficiaries.

An experienced trust lawyer can help you put up a carefully worded, sophisticated document that enables you to maintain control over your estate long after your lifetime, for the benefits of your living loved ones.

Spendthrift Trust California

In California, a spendthrift clause in a trust separates the assets in the Trust from the beneficiary’s direct control and safeguards those assets from the beneficiary’s creditors.

However, note that the protection is only viable as long as the principal assets remain in the Trust. Creditors may reach the assets at the point when the trustee makes the distribution.

Some spendthrift trusts allow the trustee discretion over when and how to make the distribution. In these cases, the trustee can protect the assets by not distributing them when the beneficiary has a case, claim, or judgment against him/her.

The protections, benefits, and efficiency of spendthrift trust as a replacement of a will boils down to the specific wordings-the terms, your wishes, and legalities. The help of an experienced trust attorney can be instrumental for reliable asset protection for many decades after you are gone.

Spendthrift Terms

A spendthrift trust’s primary goal is to keep an extravagant beneficiary from receiving all their inheritance at once. The terms should clearly state how distributions are to be made gradually throughout their lifetime.

When the inheritance is distributed in smaller portions through the years, underlying assets are protected from creditors and litigators. They can only reach the income the beneficiary receives and not what is in the Trust.

When establishing a spendthrift trust, the right legal strategy can serve more than just saving the wealth from a reckless inheritor. It can be a tool for reducing or eliminating estate transfer taxes and doubling the value of wealth that reaches the named heirs.

Spendthrift trust pros and cons

The advantages of a spendthrift trust include:

• Protects wealth from irresponsible beneficiaries: If your beneficiary is not good with money, a spendthrift trust takes care of them financially while protecting your estate for a long time.
• Protects wealth for special-needs beneficiaries: If your heir has special needs (physical and mental challenges), a spendthrift trustee manages the wealth on their behalf so they can benefit from it steadily for a long.
• Protects wealth from lawsuits: Malpractice lawsuits from work, drunk driving, divorce, and other cases can reduce a million-dollar inheritance into nothing overnight. Assets saved in a spendthrift trust are safeguarded from all that. Courts, lawyers, or creditors cannot force the trustee to pay for the beneficiary’s cases.

The disadvantages of a spendthrift trust are the following:

• It is an irrevocable trust with unamendable terms.
• In some states, litigators can reach the assets for child support and alimony.

The best legal minds can offer advice on the wordings that result in the most airtight protection for the Trust’s assets. When administering the Trust, trust lawyers can help the trustee keep the arrangement from being blown up by creditors or a disgruntled beneficiary.  Considering a spendthrift trust for a loved one?  Here at Hess-Verdon & Associates, we can guide you through the process and including other advance estate options.  Meet the team and call us at 888-318-4430.