Many Northern Virginia residents utilize trusts when doing their estate planning. But all trusts are not the same, and trust grantors have several options when deciding which trusts best reflect their family’s unique circumstances.
One possible option to explore is a spendthrift trust for some beneficiaries. Read on to see who will benefit most from this type of trust.
What they are
Spendthrift trusts are like other trusts but have additional protections built in that keep the principal from being depleted by a beneficiary’s profligate spending. The donor funds the trust and appoints a trustee to oversee its management and make disbursements to a beneficiary according to a preset schedule.
What they do
These trusts protect beneficiaries from their worst spending impulses, whether that may be blowing the trust’s funds on drink, drugs, gambling or a shopping addiction. But they also offer protections from bullying spouses and others who might encourage wasteful spending by beneficiaries for their own purposes.
Other protections spendthrift trusts offer
Beneficiaries are also protected from the trust principal being seized by creditors or it being dissipated in a lawsuit, settlement or judgment. While beneficiaries’ disbursements could still be attached to cover debts incurred, the principal remains safe and untouchable.
Are these trusts a kind of dead-hand control?
Some beneficiaries chafe at the restrictions of spendthrift trusts because they perceive their benefactor as trying to control their lives from beyond the grave. With that being said, if they feel strongly enough about the matter, they are always free to refuse the disbursements that the grantor set up (although very few do).
Only you can decide if a spendthrift trust is the right choice for your heirs. Learn more about all your options when doing your Virginia estate planning.