Trusts can be a valuable estate planning tool. Trusts can be complex, but in its simplest form, a trustee manages the assets in a trust to provide for the beneficiary.
There can be many advantages to forming a trust. One of them is that a trust is a unique vehicle for ensuring that the intent of the person forming the trust is followed.
Trusts can be established for a limited, well-defined purpose, like paying for a college education, for instance. However, under Florida law, the beneficiary of a trust holds the real interest in the trust's assets; this means that the beneficiary's creditors may be able to make a claim to future or present distributions from the trust.
For many types of trust, this is not a great concern. But what if you intend to place in trust assets to be managed for the benefit of someone who has a spending or debt management problem?
A spendthrift provision is a special tool that keeps the beneficiary from being able to transfer their interest in the trust, whether voluntarily or involuntarily. A proper spendthrift provision has the effect of preventing creditors from intercepting distributions from the trust before the distributions have reached the beneficiary.
It is admirable to want to provide for someone close to you through a trust. Yet, it can be a risky prospect to do so for someone who is not at a point in their lives to have developed careful spending and budgeting skills. A spendthrift trust can be just the thing to remedy the situation, ensuring that the beneficiary is taken care of, but also that the assets in the trust will not be squandered.
Source: Marco News, It's The Law: Spendthrift trusts offer protection, William Morris, June 21, 2013