Protecting and preserving assets is an important part of an estate plan. Not only do you want to protect your assets during your lifetime, but you also want to make sure that your assets are preserved to benefit your heirs after you die. A spendthrift trust can be a powerful tool to accomplish these objectives.
Protects assets from creditors and beneficiaries
A spendthrift trust is an irrevocable living trust managed by a trustee for the benefit of one or more beneficiaries. This can be a trust established during your lifetime, or a trust established upon your death for a beneficiary.
A spendthrift trust can protect your assets in different ways. In Nevada, there is a specific type of spendthrift trust that is designed to protect your assets from any unsecured creditors you might face during your lifetime. By contrast, a traditional revocable/family/living trust does not offer you that protection.
In addition, any type of trust can and should to some extent include a spendthrift clause that protects the beneficiaries of the trust after you die. One benefit of this type of clause is that it can protect against a creditor of the beneficiary from attaching an interest in the beneficiary’s share of the trust while you are alive and even after you die. A spendthrift trust can accomplish this by causing the assets to be owned and managed separately, as opposed to being owned and managed by the beneficiary.
Poor financial decision-making
Another important reason some people establish a spendthrift trust in their estate planning is to help protect their children or other beneficiaries from their own harmful financial decisions. This could be important for a child who has an addictive drug, substance abuse, or gambling problem. This could also be important for a child who is not mature or responsible enough financially to manage or receive significant sums of money. Otherwise, a child could be prone to lawsuits or legal proceedings where their finances could be put at risk to a creditor. A spendthrift trust can help these beneficiaries by having someone other than the beneficiary manage and distribute assets to or for the benefit of the beneficiary.
A spendthrift trust serves as an effective tool to protect your assets and pass on your legacy to your beneficiaries It can not only protect your property while you are alive, but it can also help protect your beneficiaries after you die, ensuring your legacy can have a positive, lasting impact on their lives.