The Objectives and Benefits of a Spendthrift Trust

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Safe Harbor Law Firm

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Posted on

Jul 21, 2023

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Florida - Southwest

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A spendthrift trust is typically used to prevent a beneficiary from receiving his or her inheritance all at once. There are several reasons why a grantor (the person who creates the trust) might want to consider such an approach. The most obvious reason is that the grantor believes the beneficiary will quickly squander the inheritance. That is, the beneficiary is a spendthrift.

Other reasons to consider a spendthrift trust include:

  • The beneficiary (or the beneficiary’s spouse) has many debts and, consequently, the inheritance could be lost to creditors
  • The beneficiary’s marriage is troubled and seems likely to end in divorce
  • The beneficiary’s friends are spendthrifts (or worse) and have undue influence over the beneficiary’s behavior
  • The beneficiary is simply “not good with money”
  • The beneficiary suffers from alcohol or drug addiction

How does a spendthrift trust protect the beneficiary’s inheritance in situations like these? First, the beneficiary cannot access the assets in the trust, or promise them to someone else. Thus, creditors and other threats cannot reach the trust’s assets either. In addition, since the beneficiary’s inheritance can be distributed in specified amounts over time, the entire inheritance cannot be lost all at once. Of course, the portion that is distributed would be vulnerable unless other protective measures are taken.

The Role of the Trustee

It is crucial to choose one’s trustee carefully because the terms of the trust give the trustee control over trust assets and their distribution to the beneficiary. Similarly, it is extremely important to outline the trustee’s authority in detail. Here are some examples of factors to consider when setting the terms of the spendthrift trust:

  • Should the trustee be instructed to make fixed payments according to a specified schedule, or does the trustee have some discretion to choose the amount and timing of distributions?
  • Should the trustee make distributions in cash or provide the beneficiary with goods and services instead?
  • Can the trustee withhold distributions if the beneficiary behaves inappropriately? If so, what types of behavior would trigger the withholding of assets?

Given the importance of the trustee’s role in administering the trust and managing the beneficiary’s inheritance, the choice of trustee should not be taken lightly. The decision to serve as trustee should not be taken lightly either. In certain situations, the trustee could very well be performing the role of mentor, or disciplinarian, or even parent. In addition, the trustee can be held legally and financially responsible for failing to follow the mandates of the trust.

Other factors to consider when creating a spendthrift trust include how and when the trust will end, what will happen if the beneficiary “grows up” and develops the maturity to manage the inheritance, and what should be done with trust assets if the beneficiary passes away.

If you want to leave a loved one an inheritance but are concerned about his or her ability to manage it, we can help you determine whether a spendthrift trust is a good solution.

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Safe Harbor Law Firm

Elder Law 27821 South Tamiami Trail, Bonita Springs, Florida, 34134

At Safe Harbor Law Firm (formally known as Buff Law Firm PLLC), we focus on estate planning, elder law, and closely related practice areas. Our true focus, however, is helping families plan for and take control of their future. This can involve:Ensuring your assets will go to the people you want, when you want, in the manner you want after you pass awayPreparing for the possibility that you or your spouse will need expensive long-term careand helping you find ways to pay for itEnsuring that people you trust have the authority to make financial and medical decisions on your behalf in the event of incapacityProtecting your assets and those of your heirs against threats such as creditors, lawsuits, divorce, the high cost of long-term care, and moreGuiding your loved ones through the probate and/or trust administration processSafe Harbor Law Firm has helped families from all walks of life find solutions to challenges like these and many more. We welcome the opportunity to do the same for you. Ultimately, our goal is to help you enjoy the peace of mind that comes from having a plan in place for the future. We invite you to contact us for a personal meeting to discuss your particular needs and goals.EXPERT ATTORNEYSMeet the TeamPam Buff Baker, Esq.Attorney & FounderAbout Mrs. BakerPam Buff Baker, Esq., owner and founder of Safe Harbor Law Firm works closely with clients to meet their legal needs. In particular, Pam works in all areas of Estate Planning, Elder Law, Probate and Trust Administration. Pam was recognized by Naples Illustrated in 2021 and 2022 as a Top Lawyer in Trusts and Estates to include 2023. She is also a member of the nationwide organization, Lawyers with Purpose, an organization solely focused on helping seniors. Safe Harbor Law Firm serves clients at their offices in Naples and Bonita Springs.Pam graduated magna cum laude from Tulane University, having majored in chemical engineering. Since graduating from Tulane, Pam has worked in sales, marketing, and technical support for Eka Chemicals (part of Akzo Nobel), a company division that supplies water purification and treatment systems. Later, Pam moved to Naples, Florida. Since then, Pam graduated summa cum laude from Ave Maria School of Law, where she was Associate Editor of the Law Review and a full academic scholarship recipient. During her time at Ave Maria School of Law, Pam worked in the legal department of Arthrex and interned for several local law firms. Pam is a champion golfer, having been a varsity player at Tulane, inducted into the Hall of Fame. She was an All-American golfer, three-time conference champion, conference player of the year, and student athlete of the year. When she has free time, Pam likes to play golf and go to the beach and pool with her family, including her three children ages 4, 14, and 16. Originally from the Chicago area, Pam has lived year-round in Naples, Florida since 2005.Helen Mena, Esq.AttorneyThomas Tom LaTorre, Esq.AttorneyBrittany Cocchieri, Esq.AttorneyKatherine ReillyMarketing DirectorBryan D. WoulasDirector of OperationsAndy C. BakerFirm AdministratorKelly FinckProbate and Estate Planning Legal AssistantJessica MaristanyClient Services CoordinatorBreanna CanningFunding and Medicaid ParalegalRuth DavisClient Service CoordinatorJacqui CalmaAdministrative AssistantGabby AngExecutive AssistantMackenzie McTeviaClient Services Coordinator