Spendthrift trusts are very useful for those who have loved ones with less than stellar records of managing their money. But those are not the only beneficiaries for whom spendthrift trusts are useful vehicles.
Read on to learn more about other reasons to fund a spendthrift trust.
The spouse of a loved one is very controlling
While your loved one may be fiscally astute, their spouse may demand access to the principal of a regular trust. They can quickly decimate an ordinary trust through their use of intimidation or control.
But spendthrift trusts allow beneficiaries and their spouses no access to the trust principal. Instead, a trustee whom you appoint will both manage the funds and control disbursements according to a schedule predetermined by you during your lifetime.
Your beneficiary is at risk of litigation
If they work as a legal or medical professional, they are exposed to malpractice litigation from disgruntled clients or patients. Even if innocent of all allegations, they could still be subject to settlements from their insurers or judgments from the courts.
These exposures leave traditional trusts vulnerable to being attached for payments, whereas spendthrift trusts have an added layer of protection from claims and garnishments.
Lack of financial savvy
Even beneficiaries who are otherwise fiscally responsible may lack the skills to manage a traditional principal. Concerns over possible depletion of resources can be mitigated by funding spendthrift trusts.
Are these trusts a form of dead-hand control?
That phrase is used by some beneficiaries who resent the trust funder’s perceived attempt to control the beneficiaries’ finances from beyond the grave. Those who feel strongly about the arrangements are always free to refuse disbursements the funders set up (but few do this).
