When it’s best to set up a spendthrift trust for beneficiaries

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.