Spendthrift Trust Attorney in Redlands, California
Wills, trusts, powers of attorney, and living wills/advance health care directives are some of the major components of comprehensive estate planning. Estate planning involves preparing for every possible eventuality, including who may get your assets once you’re gone.
A will is a basic instrument for designating beneficiaries for your estate – everything you own that is not the joint possession of a spouse or partner. Wills have the downside of having to undergo probate in a court of law. A trust, on the other hand, can designate beneficiaries of your estate and avoid probate.
The two major types of trust are called revocable or “living” and irrevocable. In either type, you assign your assets to the trust, and a trustee will manage those assets.
In a living or revocable trust, while you’re alive you are the trustee, and a person you name as your successor will take over upon your death. In an irrevocable trust, you designate a trustee, and that person has complete control of your assets going forward. In either type, you can name your beneficiaries and assign assets to them.
Say you’re setting up your estate plan and have a will or trust naming your children as your heirs and beneficiaries, but one child you don’t trust with money. Perhaps this person loves to spend – in your view, “waste” – money as soon as they get it. The bottom line, you don’t want them to have unfettered control of a newfound source of funds.
The answer here is that you can set up a spendthrift trust. The assets placed in the trust will be managed by a trustee you name, who could be a family member, associate, or even a financial institution. The beneficiary of the trust will not be able to directly access the assets. Even if they run up debts, the creditors cannot touch the assets in the trust.
For all your estate planning needs, including a spendthrift trust, in or around Redlands, California, contact The Elder & Disability Law Firm, APC. The attorney at the firm helps people of all ages plan and prepare for the future so that they and their loved ones can have peace of mind going forward. The Elder & Disability Law Firm, APC, proudly serves clients throughout Southern California, including Redlands, Riverside, Rancho Cucamonga, and Palm Springs.
What Is a Spendthrift Trust?
Assets placed into any kind of trust are controlled by a trustee. As mentioned earlier, in a basic living trust, the trustor who sets it up becomes the trustee so long as they are capable; in other words, so long as they’re not incapacitated or gone. In those circumstances, a successor trustee takes over. If there are instructions for distributing assets, the trustee will carry that out just as would an executor of a will – but without probate court proceedings.
Unlike a living trust, which disappears once the trustor dies, a spendthrift trust is set up to continue operating after the death of the person creating it. The named trustee is then charged with ensuring that the beneficiary of the spendthrift trust won’t abuse the assets. The trustee can be instructed just to pay for legitimate expenses such as rent or mortgage payments, medical bills, living expenses, and so on.
Another benefit of a spendthrift trust is that creditors cannot access any of its assets. The assets belong to the trust, not the beneficiary. So even if the beneficiary runs up massive debts, creditors cannot collect from the trust.
Pros and Cons of a Spendthrift Trust
The main reason to set up a spendthrift trust is that you don’t completely trust the beneficiary with a sudden influx of property, cash, or other assets. They might blow it on a lavish lifestyle or personal habits. The major benefit of a spendthrift trust is that the trustee can monitor the spending habits of the beneficiary and ensure that there is no abuse of the trust funds.
A con is that if you choose a less-than-capable trustee, the trust funds might be mishandled, or the trustee could refuse legitimate expenses of the beneficiary due to a misunderstanding or personal feelings toward the beneficiary. Another con for the beneficiary, depending on how the trust is managed, is having to convince the trustee to release funds when necessary.
Here, though, the trust could be set up to allow a monthly stipend for the beneficiary, much like an allowance. Other expenses would have to submit and prove necessary to the trustee.
Setting Up a Spendthrift Trust
Obviously, setting up a spendthrift trust is going to have to take a lot of soul-searching and decision-making on the part of the trustor. You have to strike a fair balance between the beneficiary’s needs and aspirations and the instructions the trustee must follow. It’s also not a simple do-it-yourself project, such as going online and filling out a form. You need to consult with an experienced estate planning attorney to take into every possible consideration.
Spendthrift Trust Attorney Serving Redlands, California
If you feel you need to establish a spendthrift trust for a beneficiary, contact The Elder & Disability Law Firm, APC. An attorney will meet with you, help you assess your options, and create the legal instrument necessary to put the trust in place. The estate planning attorney at The Elder & Disability Law Firm, APC, proudly serves clients in Southern California.