If you are thinking about leaving money to someone who isn’t very good with managing financial matters, you may wish to consider using a spendthrift trust. A spendthrift trust is a powerful tool that makes it possible for you to protect a loved one from himself.
If you have worked hard to build a legacy that you are going to leave to your family members, you don’t want someone’s irresponsibility to make your gift meaningless as the wealth is squandered soon after the gift is made. Instead, you can take steps to protect the wealth that you are leaving behind and make sure it is used in smart ways. You can keep continued control and help your financially irresponsible loved one stay secure if you make a plan in advanced that includes the creation of a spendthrift trust.
Sinclair Prosser Gasior can provide assistance with spendthrift trusts and with other kinds of trust. We will explain to you what this trust means, what is involved in creating one, and what the pros and cons are to trust creation. Once we have helped you to evaluate whether a spendthrift trust is right for you, our experienced attorneys can go through the process of actually helping you to make such a trust for your loved one. Give us a call to find out more about the assistance we offer.
How Does a Spendthrift Trust Work?
When you make any kind of trust, the process involves using a legal document to create the trust as something separate from you and your loved ones. The trust is its own “entity,” and the trust can own the property you put within it. You can transfer many types of personal property and even real property into your trust, but must make sure you understand what the rules are and whether a transfer could trigger adverse consequences like your bank demanding your full mortgage balance be repaid.
When you want to give money to an heir who you think is going to be financially irresponsible, you can create your spendthrift trust and transfer the desired money and property into it. The trust now owns the property. You can name the irresponsible heir as the trust beneficiary. The trust beneficiary is the person who benefits from the trust. The assets within it are used for his or her benefit.
You also must name a trustee. The trustee is the person with the fiduciary duty to manage trust assets in an appropriate way, to follow the instructions in the trust document, and to act in the best interest of the beneficiary. The trustee takes care of the wealth within the trust and, according to what you stipulated in the trust document, uses the wealth to advantage the beneficiary. The beneficiary could receive a set amount of money periodically distributed from the trust, or you can set up other rules, conditions, and protocols to facilitate the trust assets being used to benefit the trust beneficiary.
Since the trust beneficiary does not own the wealth that is in the trust, and cannot control it or access it, the money is safe. Creditors are not going to be able to get at it in order to satisfy a judgement that could be rendered against the heir who is bad with money. The financially irresponsible trust beneficiary is also not going to just be able to spend all the money very quickly with no strings attached.
Should You Make a Spendthrift Trust?
Whether or not you should make a spendthrift trust is going to depend upon many different factors, including whether you actually have someone in your life who you want to leave money to but who you don’t think can handle managing that money wisely.
There are costs associated with trust creation and with ongoing maintenance of the trust by the trustee. You must carefully consider whether the costs are worth avoiding the possible risk of the money you worked so hard to acquire being spent quickly or taken by creditors of an irresponsible heir.
Getting Help from A Maryland Trusts Lawyer
Before you make your estate plan, you should understand what spendthrift trusts are, how they work, and when you might need one. It is confusing to understand all of the trust laws and to know all of the rules of trust creation. The good news is, Sinclair Prosser Gasior can help you to undrstand options for trusts and can assist you in making the right choice on whether a trust is right for you and your family.
To find out more about how a spendthrift trust could fit within your estate plan, give us a call at 410-573-4818 or contact us online to speak with a Maryland trust lawyer. You can also download our free estate planning worksheet to discover more about the role a trust could play in your estate plan.