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An overview of the spendthrift trust

On Behalf of | Nov 19, 2023 | Estate Planning

A spendthrift trust may be an ideal way to protect a beneficiary from squandering or losing an inheritance. The trust itself allows you as the grantor to determine when and how money, a Missouri home or other assets can be distributed or accessed. In addition to protecting beneficiaries from their own bad behaviors, it may be possible to shield assets from creditors or others who may seek to take assets.

When to consider a spendthrift trust

A spendthrift trust may be ideal if you have a beneficiary who struggles with drug or alcohol abuse or who has trouble managing money. For instance, you may have an adult son who drinks too much or likes to gamble. Creating safeguards around an inheritance can minimize the risk that years of estate planning are for naught because your son decided to place a large bet on a football game. Spendthrift trusts can also be helpful if you have a minor beneficiary as that person cannot keep property in their own name.

Other issues to consider

A spendthrift trust does have its own tax ID number, which means that an additional tax return will need to be filed for it. You will also likely incur additional fees to have the trust created and managed properly. Furthermore, if it is determined that you are using the trust to evade paying priority creditors, the trust may be invalidated or significantly weakened by a judge.

The use of a trust and other estate plan documents may make it easier to manage your affairs today and settle your affairs after your death. It’s a good idea to review your estate plan at least once a year or after major life events to ensure that your plan does what you need it to do.