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What is a spendthrift trust?

On Behalf of | Apr 22, 2024 | Estate Planning

Are you worried about how one of the beneficiaries in your estate plan is going to use their inheritance? Maybe you consider them a bit “unreliable” or maybe they make questionable choices. You feel like they will just burn through money and make frivolous purchases, so leaving them a significant inheritance is risky because they could quickly waste all of the money that it took you decades to earn for them.

In a situation like this, you may want to use a spendthrift trust. You don’t have to leave those financial assets to your beneficiary directly. Instead, you put them in the trust and declare that the trust itself owns them.

How are distributions made?

From there, you pick a trustee and you determine how you want distributions to be made by that trustee. There is certainly some flexibility here for you to pick a plan that works best for your family and your specific situation.

For example, perhaps you think that the beneficiary is just irresponsible because they are young. You could state that they’re not allowed to take any money out of the trust until they turn 40 years old. Or perhaps you think they’re going to make frivolous purchases, rather than doing something like paying for a college education, starting a business or buying a family home. If so, you can specify the exact ways that they can use the money in the trust, and it won’t be authorized for other purchases. 

Drafting your estate plan

This is just one way that you can use a trust, helping you see how beneficial it may be. As you make your estate plan, carefully look into all of your legal options.


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