Whether you reside in California or some other state, it can be difficult to plan for the future of your descendants, as there are so many laws to learn about and options to choose for dispensing assets. One option for giving your assets to your loved ones after your passing is a spendthrift trust. If you have never heard of such a trust before, it is fitting that you understand how it works before choosing to establish one.
The spendthrift clause
Of the different kinds of trusts, you may choose a spendthrift trust if you want to exert some control over the beneficiaries’ access to the funds. An example of this is that you will only allow access to your estate when your beneficiaries follow certain rules or meet specific conditions. This can be accomplished through something known as a spendthrift clause. What this clause will do is designate the trust as the owner of the assets as opposed to beneficiaries.
The beneficiaries, of course, will still receive assets from the trust. However, those assets will be slowly released over time to them based on your wishes. Your beneficiaries will not have access to the entire trust at once.
Benefits of spendthrift trusts
Spendthrift trusts are very useful for certain grantors that have concerns regarding beneficiaries during estate planning. Their benefits include the fact they:
- Enforce more responsible spending habits
- Prevent the trust from being emptied quickly
- Protect the assets from creditors
- Can help your heirs bypass the probate process
- Make your wishes known and enforced
Setting up a spendthrift trust is like setting up other trusts; however, there are a couple of extra steps. You will need to specify how often you want assets released and how much can be released at one time. You can also outline guidelines for how emergencies should be handled, such as by stating the conditions that should be met for extra funds to be released in an emergency.