A spendthrift trust is a tool that allows you to provide a secure financial future for your child who has difficulty managing money. Your child will receive incremental payments on a schedule that you devise when you set up the trust. This ensures that your child will have the income that you intend for them, but they will not be able to spend it all at once.
When you set up the trust, you will name a beneficiary (in this case your child) and a trustee who will oversee the trust when you are gone. The trustee will see to it that your wishes are followed and your beneficiary receives the trust fund payouts according to your plan.
Reasons to set up a spendthrift trust
One of the biggest reasons to set up a spendthrift trust fund has to do with your child’s spending habits. If, for example, your child has a drug, alcohol or gambling addiction, the chances are high that they would use up any money you leave for them much quicker than you would like. No matter how much they beg the trustee for more money, they will not get an unscheduled payment.
A spendthrift trust fund comes with built-in protection. Creditors cannot garnish money from it, which means that your beneficiary will not lose the funds you intended for them. If you set up the trust as irrevocable, it is not subject to dissolution should your beneficiary ever file Chapter 7 bankruptcy.
Ensuring your child’s financial future
The plans that you make now can benefit your child for many years to come. Setting up a spendthrift trust fund doesn’t have to be difficult. To learn more about your options, contact an experienced legal guide today.