• Skip to primary navigation
  • Skip to main content

The Hayes Law Firm

Estate and Elder Law Information Center

  • (626) 403-2292
  • Attend a Free Webinar
  • Home
  • Our Firm
    • About Our Firm
    • Virtual Estate Planning
    • About The American Academy
    • Advantages of Working With Our Firm
    • Attorney and Staff Profiles
    • Speaker Connection
    • Multi-Media
    • Reviews
    • College Internship Program (Marketing)
  • Estate Planning
    • Asset Protection & Business Planning
    • Estate and Gift Taxes: Figures
    • Family-Owned Businesses
    • Financial Planning Assistance
    • Incapacity Planning
    • IRA & Retirement Planning
    • Legacy Planning
    • LGBTQ+ Estate Planning
    • Pet Planning
    • SECURE Act
    • Special Needs Planning
  • Probate Process
    • CA Probate & Estate Planning Savings Calculator
    • California Probate Process
    • Common Probate Questions
    • Probate Resources
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • The Mourner’s Bill of Rights
      • Trust Administration & Probate Definitions
      • When a Loved One Passes Away With a Trust
      • When a Loved One Passes Away With a Will
    • Why Hire a Probate Attorney?
  • Trust Administration
    • Trust Administration Resources
    • Trust Administration Assistance
  • Resources
    • Feature Articles by The Hayes Law Firm
    • DocuBank
    • COVID-19 Estate Planning Resources
    • Educational Heroes
    • Elder Law Reports
    • Estate Planning Resources
      • Estate Planning Checkup
      • Estate Planning Definitions
      • Estate Planning Articles
      • Estate Planning Reports
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Top 10 Estate and Legacy Planning Techniques
    • Frequently Asked Questions
      • Estate Planning FAQ’s
      • FAQ’s for Families Without an Estate Plan
      • Legacy Wealth Planning FAQ’s
      • LGBTQ Estate Planning FAQ’s
      • Trust Administration & Probate FAQ’s
    • LGBTQ+ Resources
    • Newsletters
    • Special Needs Resources
  • Elder Law
    • Are You A Caregiver for a disabled loved one?
    • Coping With Alzheimer’s
    • Emergency Medi-Cal & Nursing Home Planning
    • Guardianship & Conservatorship
    • Hospice Care
    • Medi-Cal Planning
    • Veteran’s Benefits
  • Seminars and Webinars
  • Contact Us
    • Preparing for Your Initial Consultation
  • Blog

Do You Need a Spendthrift Trust?

William Hayes · May 6, 2019 ·

image

A Spendthrift Trust

You create a trust to protect, preserve and pass on your wealth to your heirs. But how do you keep your family money safe, not only from creditors, but also from the heirs themselves? Create a spendthrift trust. A trust is used to disburse in a controlled way money and assets you’ve accumulated over a lifetime. A spendthrift trust forbids beneficiaries from spending any money until they receive distributions.

How does it work?

An asset management company is hired, perhaps one that’s structured as a registered investment advisor if you want the trust’s money invested. You make the trust irrevocable. The trustee has authority to determine which payments are necessary according to the trust agreement. The principal remains in place, generating dividends, interest and rents safely and securely for decades to come.

So, how do you create one of these instruments?

The process is the same as establishing any other kind of trust, but the trust instrument must contain a spendthrift provision. An attorney can offer advice on the wording and what works best in your state.

Most states, by the way, won’t let you create a spendthrift trust and name yourself as the beneficiary. This is to prevent fraud against creditors. But when you create a safeguard trust, you get the added benefit of safeguarding your assets from creditors who cannot access nor attach the trust’s funds. However, creditors who supply your heirs with such necessities as food, shelter, clothes or transportation usually can receive payment from the trust. Trusts also can be tapped for payment of alimony or child support. But a spendthrift trust potentially safeguards assets should an heir experience a bankruptcy.

Stories abound about people who don’t handle newly acquired wealth well — lottery millionaires who blow all the money and professional athletes who become bankrupt shortly after their careers end. Sudden wealth without financial aptitude often ends badly.

Inheriting Significant Wealth?

If your children are going to inherit significant wealth, it’s hard to instill instant financial responsibility. By using what is also called an asset protection trust, you give the trustee or trustees broad discretion to provide your beneficiaries with funds — income or principal — to maintain their lifestyles, but without allowing them direct access to the principal.

The life of the trust can be for your beneficiaries’ lifetimes or for a planned number of years, stating that distributions cannot be made until the heir reaches 18, 25, 40 or even 50 years old, thus withholding funds to protect your financially challenged heirs from themselves until you believe financial acumen has been acquired.

A spendthrift trust also can be used to protect people who may be mentally incapacitated. Other stipulations can protect heirs from being sued from creditors trying to attach their property interest in the trust.

We can counsel you on the correct spendthrift language that states will recognize as valid.

For more information on this topic, contact our office to schedule an initial consultation with one of our experienced attorneys!

Call Us Today: 626-403-2292

image

  • Author
  • Recent Posts
William Hayes
William Hayes
As an attorney in private practice in Los Angeles County, California William Hayes provides extensive estate and tax planning services to individuals and businesses in Los Angeles, Pasadena, Glendale, Burbank and surrounding communities. Attorney Hayes’ primary focus is to help clients avoid probate, protect their assets, and provide for the security of their loved ones with a well-crafted estate plan. He believes in giving each client the time needed to explain his or her needs and wishes and then dedicates his efforts toward making the client’s desires clear in their final estate plan.
William Hayes
Latest posts by William Hayes (see all)
  • Travel Tips for Senior Citizens - May 23, 2022
  • Trusts for Those With Addiction Problems - May 22, 2022
  • What to Know About Credit Scores - May 9, 2022

Blog Subscription

Sign up for our newsletter and get our news straight to your inbox!

Stay Informed

Where we are

The Hayes Law Firm
729 Mission St. #300
South Pasadena, CA 91030
Phone: (626) 403-2292
Fax: (626) 403-2299
Proud Memberaaepa

Office hours

Monday9:00 AM - 5:00 PM
Tuesday9:00 AM - 5:00 PM
Wednesday9:00 AM - 5:00 PM
Thursday9:00 AM - 5:00 PM
Friday9:00 AM - 5:00 PM

Map

map
  • Facebook
  • Instagram
  • LinkedIn
  • Pinterest
  • Twitter
  • YouTube

The information on this website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

© 2022 · American Academy of Estate Planning Attorneys, Inc. | Disclaimer | Privacy Policy | Sitemap | Contact Us