Spendthrift trusts are those that contain clauses intended to keep a beneficiary from squandering an inheritance. A person who wants to leave a significant amount of money to an heir, but does not trust them to spend wisely, should visit the website to hire a wills and trusts attorney in Broken Arrow OK and use a spendthrift trust to protect the heir from their own bad choices.
A spendthrift trust prevents a beneficiary from borrowing against money in the trust, and its language prevents creditors from attaching trust funds for consumer debt payments. For the trust to work, the language must be very specific. Below is a sample provision that may be found in trust documentation:
“Except as provided in the trust agreement, all current and future payable income to a trust beneficiary shall not be subjected to assignment or transfer. A beneficiary cannot encumber such an interest. While the interest is in the trustee’s possession, it cannot be subject to contracts, obligations and torts of beneficiaries. Interests shall be kept free from control or claim by beneficiaries’ spouses and parents.”
Spendthrift Trusts and State Law
Laws in most jurisdictions recognize a spendthrift trust, and provisions are upheld to prevent an involuntary or voluntary transfer of a beneficiary’s interest. Simply put, a beneficiary can’t pledge or spend trust money, and creditors cannot take it. However, a person cannot create a spendthrift trust to prevent creditors from taking their money.
Some Debts Can’t Be Avoided With a Spendthrift Trust
Despite the advantages of a spendthrift trust, it’s not possible to fully protect trust assets. Under state law, trust assets can be used to pay government claims, child or spousal support, and for necessities such as shelter and food. State law can impose a limit on amounts protectable from creditors; a wills and trusts attorney like Matthew E Riggin PLLC can advise clients on the most advantageous way to structure a trust.
The Role Of A Trustee
A trustee is charged with doling out trust funds according to the trust’s terms. Trustees can pay the beneficiary directly if allowed or required, or trust documents may direct a trustee to release some or all funds to the beneficiary at a certain age. In such cases, the trustee must make the payment, even if there’s a high risk of the beneficiary squandering it.
