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Setting up a spendthrift trust for your beneficiary

On Behalf of | Sep 18, 2022 | Estate Planning

You are making your estate plans and want to leave a substantial amount of money to your only child. You have some concerns because they are not good at managing their money. How can you provide for them without enabling their bad habits?

A spendthrift trust fund is a great way to take care of your beneficiary if they have a problem with reckless spending. When you set up a spendthrift trust, you will appoint a trustee who will oversee and distribute the funds on your terms once you have passed away.

Since your child (beneficiary) does not control the distribution of funds, their creditors can not garnish the trust. Any funds that come from the trust are protected from debt collectors.

Benefits of spendthrift trusts

These are some of the benefits of setting up a spendthrift trust:

  • The funds will be distributed in predetermined incremental payments instead of your beneficiary receiving one lump sum. This will help to curtail your beneficiary’s impulse spending habits.
  • Probate can be bypassed if the trust was established during your lifetime.
  • Your beneficiary’s credit will be protected.
  • You provide financial security for your beneficiary’s future

Should you establish the trust to disperse money to your child during your lifetime, you will be considered the trustee. You must make sure to name a successor to take over the role of trustee upon your passing.

Taking the time to set up a spendthrift trust fund now allows you to rest in the knowledge that you have provided for your beneficiary. What’s more, it ensures that the money is safe from being spent all at once. Setting up a spendthrift trust will ensure that your loved one will benefit from your estate for many years to come.