One of the main purposes of a trust is to protect the assets in the trust for the benefit of the beneficiaries. Unfortunately, sometimes beneficiaries can get into financial trouble that threatens the integrity of the trust. An estate plan that includes a spendthrift trust can help prevent the worst outcome: a depleted trust that is unable to pay its beneficiaries.
What does a spendthrift trust accomplish?
A spendthrift trust is a good choice for people who worry that family members or other beneficiaries might somehow endanger the money in the trust, preventing it from achieving its long-term goals.
Spendthrift trusts differ from other trusts most significantly in one area: distributions. Beneficiaries receive distributions from trustees to maintain their lifestyle, subject to the terms of the trust. In other words, they have no legal right to the money in the body of the trust unless or until it is distributed to them. Because they don’t have a legal right to the money in the trust, neither do their creditors. This helps ensure that the assets in the trust will still be there when it is time for the trust to accomplish long-term goals, such as paying for a grandchild’s education.
A spendthrift trust requires clear, unambiguous language to make sure its goals and its procedures are clear. Unlike other states, New Jersey permits a beneficiary to act as a trustee of the trust. Provisions for amending or modifying the trust also exist.
A spendthrift trust provides those with a willingness to acknowledge and plan for unexpected circumstances. An attorney with experience can explain how trusts can help many families achieve their long-term goals.