Heritage Law Group
The basics of a spendthrift trust
Parents and others in San Jose who are planning to leave significant assets to their children, or who wish to transfer those assets to them as part of their planned giving, may face a bit of dilemma.
On the one hand, it could make economic sense to make these transfers. Moreover, on an emotional level, parents and others love their children and usually want to share their abundance with them.
On the other hand, they could see early signs that if the young person gets unfettered access to money, it will be blown quickly. Moreover, it often makes good sense to allow anyone, even a responsible young adult, to have some time to mature and get life experience before coming in to significant wealth.
This is where a spendthrift trust can prove to be helpful. As the name suggests, a spendthrift trust is set up so as to allow the trustee, or steward of the trust funds, to distribute money for what a child needs, and perhaps some of what he or she wants, while giving the trustee enough control to rein a child's spending habits in when necessary.
In this manner, spendthrift trusts allow people to transfer their wealth down to the next generation while to some extent protecting the beneficiaries from their own bad decisions. Spendthrift trusts can also help protect the family's wealth from claims of creditors or from situations involving divorce or bankruptcy.
There are a number of ways in which a California resident can incorporate spendthrift trusts in to their overall estate plans. Whether a spendthrift trust is right for a given person's situation, and the details of how that trust is to be set up, are best worked out with the help of experienced attorneys who handle wills and trusts frequently.
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