It used to be that spendthrift trusts were only written for cautious relatives to protect careless or financially-challenged from themselves. Traditionally they would be set up to keep the bulk of the assets out of the hands of the actual beneficiary. Then the trustee would prudently invest and manage the assets, distributing enough to the beneficiary to maintain a certain lifestyle. The goal was to prevent liquidation of the assets at one time, and ensure protection for the estate being handed down to multiple generations.
Trusts of this nature are set up to help keep future benefits safe, unaffected by today’s bad investment or spending spree. Those receiving benefits from the trust have a built in regulator or governor to slow the flow of money.
However, protecting financially unaware from themselves isn’t the only benefit of a spendthrift trust. While this traditional purpose is just as important in today’s consumer-oriented world, you have a new reason to talk to your estate planning attorney about incorporating a trust into your plan:
The current lawsuit-friendly environment makes legal action a tempting option for many people after accidental injury. Even your child or grandchild has a good handle on their investments and expenditures, this kind of lawsuit can be a disaster for their finances. A spendthrift trust is a great way to build protection into an inheritance, even if the beneficiary is the furthest thing from a spendthrift.
All it takes is someone tripping over the wrong rug during a visit to put a solid, generations-old estate in jeopardy. If that person wins a lawsuit against the beneficiary, the money and property that was so carefully earned, maintained, and handed down can be gone in the blink of an eye.
A spendthrift trust prevents judgment creditors from reaching the trust assets in the event of a lawsuit, thereby protecting the beneficiary from legal actions.
At Oakstone Law we know that lawsuits happen for many reasons. So, while the word “spendthrift” makes the plan seem specifically designed for the less money-conscious, the concept is actually a smart addition to any plan. Accidents can happen to anyone, and it pays to think ahead.
About Oakstone Law, PL
Oakstone Law PL was founded by Bob Kleinknecht. A member of the Family Trust Subcommittee, the Estate Tax & Trust Planning (ETTP) Committee and the Real Property, Probate & Trust Law (RPPTL) Section of the Florida Bar, Kleinknecht has 15 years’ experience.
Prior to founding Oakstone law, he spent more than eight years serving as a personal, in-house estate, tax and charitable planning attorney for a Forbes 400 family in New York and Florida. Before that he was an estate planning and estate settlement attorney with prominent firms in Boston and Washington, D.C. after beginning his career with a boutique firm in Naples, Florida.
Licensed in Florida and Massachusetts, Kleinknecht has developed a practice model that eliminates billing by the hour and offers a streamlined, customized client process supported by technology, security and a personal approach.
For more information on Oakstone Law, click here or call 239-206-3454. Our office is located at 5137 Castello Drive, Suite 2 in Naples, Florida 34103.