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: