There are many ways to take care of estate planning in Arizona. One effective way to get your estate in order while providing for someone you love is through a spendthrift trust. While this type of trust might be unfamiliar, it can be extremely beneficial to establish for your beneficiaries.
What is a spendthrift trust?
In the world of estate planning, a spendthrift trust gives its grantor, or person establishing this entity, a way to control how beneficiaries access the assets in the trust. You can name yourself as a spendthrift trust’s trustee. That said, you must also have a successor trustee who can step in due to your death or incapacitation.
Situations when spendthrift trusts are useful
Before establishing a spendthrift trust, it’s good to know who benefits most from it. While this type of trust offers asset protection for grantors, its primary benefits are for beneficiaries.
A spendthrift trust is most beneficial in the following situations:
- Young individuals: A spendthrift trust is beneficial for people who are too young to know about proper money management.
- People who are bad with money: You understandably love your beneficiaries. However, that doesn’t mean they’re financially responsible. These people benefit from spendthrift trusts because your terms can help prevent depleted inheritances.
- Those dealing with creditors: Creditors can attempt to resolve debts by going after nearly any debtor’s funding sources, including recent inheritances. Funds in a spendthrift trust can protect your loved one’s assets from a creditor’s grasp.
- When divorce looms: With an estimated 50% of marriages ending in divorce, divorcing is an unfortunate reality for many married couples. Spendthrift trusts are great ways to ensure sizeable assets aren’t lost during a divorce.
A spendthrift trust does cost money to establish and maintain. However, these expenses are worthwhile if you know someone who can benefit from asset protection.