What Is A Spendthrift
There is often that one family member that constantly makes poor financial decisions because of a number of reasons. This could be because that family member is abusing drugs, addicted to shopping, or is just immature. If this family member is your child and you are thinking of leaving them an inheritance, then a spendthrift trust may prevent that child from wasting their inheritance within a short amount of time. Talk to an experienced Texas estate planning lawyer to help you create a spendthrift trust.
How A Spendthrift Trust Works
All you need to do to create a spendthrift trust is include language that shows that the grantor of the trust intended the trust to qualify as a spendthrift trust. A spendthrift trust not only protects your heirs from themselves but also from their creditors. It puts restrictions on the beneficiary’s access to the trust property.
The beneficiary receives benefit from the trust through a trustee named in the trust by the grantor (creator of the trust). A trustee could make regular payments to the beneficiary or by goods or services for the beneficiary. The terms of the trust determine how and when the trustee makes payments to the beneficiary. So the grantor should carefully select a trustee the grantor is sure will carry out the terms in accordance to the grantor’s wishes.
Creating A Spendthrift Trust For Yourself
Creating self-settled spendthrift trusts to protect your assets from your creditors is actually against public policy. Your creditors will still have access to your assets even if you add a spendthrift provision to your trust. This is why unscrupulous people cannot use spendthrift provisions to defraud creditors. A spendthrift trust is meant to protect the assets you worked hard to accumulate from being squandered away by heirs or beneficiaries after your death.
Why You Need A Lawyer To Create A Spendthrift Trust
A lawyer can ask you detailed questions to find out what you want to accomplish with the trust and help you create a trust that is right with you. Some of the things you have to decide when making a trust include:
- When and how the trust will end
- Whether to allow for special payouts in a situation where the beneficiary faces large expenses such as medical expenses or college tuition
- What happens to the trust assets if the circumstances of the beneficiary changes
All this is complicated stuff that an experienced estate planning lawyer can make easier for you to understand.
Requirements For Creating A Trust In Texas
Texas Law has the following requirements for creating a trust:
The person creating the trust must appoint a trustee to hold the legal title of the trust property on behalf of the beneficiaries of the trust
- The settlor (person creating the trust) must name the beneficiaries of the trust or the trust may fail
- The settlor must have the intent to create the trust, and must identify the property covered by the trust and transfer that property to the trust
- The trust must have a legal purpose
- The trust must not be created for fraudulent purposes