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Spendthrift trusts in estate planning

On Behalf of | Aug 9, 2023 | Estate Administration & Probate

Many people may want to pass along assets to a California loved one when they pass away. However, they may be concerned about their loved one’s ability to manage the funds or even their vulnerability to creditors. A spendthrift trust is one solution that people may consider as part of their estate planning, as this mechanism can provide for named beneficiaries while ensuring that asset distribution takes place according to the trust creator’s terms and conditions.

Understanding the spendthrift trust

This kind of trust is established by a grantor, who names a trustee to manage the trust and distribute its assets. The grantor also names one or more beneficiaries, who will receive the assets held in the trust or income from those assets. The spendthrift provision in the trust is used in the estate planning process to name the trust itself as the owner of the assets, rather than passing the assets on to the beneficiary as the owner after the grantor’s death. Instead, the trust contains provisions for releasing the assets over time and on a schedule.

Why use a spendthrift trust

The purpose of a spendthrift trust is to protect the assets from irresponsible spending or mismanagement and can be used for children, people dealing with mental health or substance use issues, or any personal circumstances of concern. These protective provisions can help to ensure an ongoing flow of support. In addition, many assets in a spendthrift trust may be protected from creditors or judgments, because they are owned by the trust and not by the beneficiary.

Spendthrift trusts can be set up to distribute the assets on a regular basis, such as monthly, annually, or quarterly, and they can also contain provisions for emergency distributions in case of urgent circumstances. Carefully considering the use of spendthrift trusts could help in providing peace of mind and a clear plan for the future.


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