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What is a spendthrift trust, and how can it benefit you?

In today’s above-cited blog headline, the referenced “you” refers to the individual who establishes a trust. The legal designations for that person are actually several and liberally substituted. Trust creators are sometimes called trustors, grantors or settlors, with even other terms occasionally being used. We’ll just go with creator in today’s post entry.

As a creator, you obviously benefit from the trust you have established. With requisite help from a proven estate administration attorney, that legal vehicle will operate down the road – even perpetually and long after your death – in precisely the manner you intend. That promotes peace of mind, obviously.

And trusts often benefit third parties in material ways, frequently family members like spouses and children. Those people are the beneficiaries of your trust. Given that trusts are highly flexible estate planning instruments, the terms and conditions of your largesse can be employed in impressively creative ways.

One noteworthy trust type referenced recently in a Los Angeles Times article is the spendthrift trust. That vehicle is often described in terms of its ability to safeguard an heir from his or her own tendency to plow through assets at a frightening pace.

It’s often like this: You aren’t hurting for money, but your adult kids soon will be if you just turn over the family wealth to them without restrictions.

A spendthrift trust provides needed safety, acting much like a brake on finances. It can be structured by a creator so that beneficiaries receive only a set amount of income at stipulated intervals, leaving trust principal untouched and inaccessible to them. A trustee designated by the creator handles finances as directed.

Spendthrift trusts can command broad utility, including the power to keep trust monies freely safe from creditors’ payment demands.

The Times columnist strongly recommends that any person interested in learning about spendthrift trusts and possibly establishing one secure timely help from proven estate planning legal counsel. If you don’t have a proven attorney on board, she states, “you need to get one.”

Properly considered and executed, a spendthrift and/or other type of trust can be a powerful tool for preserving and allocating family wealth.

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