Idaho Estate Planning Using a Spendthrift Trust in Your Estate Plan
By Lane V. Erickson, Idaho Estate Planning Attorney
While the main purpose of estate planning is to protect you while you are alive and give you an opportunity to create a plan for the distribution of your money, property, and assets after you die, these are not the only reasons for estate planning. Rather, estate planning can also be used to help you create a plan to provide for your loved ones and family after you are gone in a way that also protects them and their interests. In other words, if you have family or loved ones who are minors, or who are financially irresponsible, or who suffer from a disability or from addictions, you have the option of creating a trust as part of your estate plan to help these specific individuals. You have the ability to provide specific instructions concerning such a trust that will work in a way to benefit and help such a family member or loved one.
At the Racine law office our team of premier Idaho estate planning attorneys work together to help each client create a customized estate plan to meet their needs while they are alive and the needs of their loved ones and family members after they are gone. We utilize our customized Estate Planning Questionnaire together with a free 30-minute consultation to gather information about you and your family members and loved ones so that we can discuss the many options that are available to you in meeting your goals and intentions when it comes to your own estate plan.
The lawyers on our team include partners Randy Budge and Lane Erickson and attorneys Nathan Palmer and Dave Bagley. Each of the Idaho estate planning attorneys on our team has received the highest ratings for their ethics and legal abilities in helping their clients reach their goals.
Estate planning is a broad topic. There’s no one article that can discuss every option available to an individual as they are creating their estate plan. The purpose of this article is to focus on using a spendthrift trust as a way of protecting the money, property, and assets that you want to distribute to a family member or loved one when you are concerned about their ability to handle such a gift. This article will first talk about what a spendthrift trust is and how it is created and then it will discuss who can use a spendthrift trust as part of their estate planning.1. What is a Spendthrift Trust
So, what exactly is a spendthrift trust? A spendthrift trust is a trust that is created and funded by an individual such as a parent for their child where the child doesn’t have direct access to the funds. Although we are using a parent and child relationship to illustrate what a spendthrift trust is, this type of relationship is not necessary for the creation of a spendthrift trust. The key for a spendthrift trust to exist is simply that the trustees are given discretion as to when and/or whether funds from the trust will be distributed to the beneficiary. Alternatively, a trustee can use trust funds to benefit the beneficiary without giving those funds directly to the beneficiary.
For example, let’s suppose that a parent has a minor aged child that they want to provide for. One of the specific goals of the parent is to help the child get a college education. If the parent passes away, and a spendthrift trust is used, the trustee can pay for the child’s tuition, books, room and board, and other college expenses, without ever giving the money directly to the child, even after the child turns 18 and becomes a legal adult.
The purpose of a spendthrift trust is to protect the assets from both the beneficiary and the beneficiary’s creditors. Because the beneficiary has no specific rights to directly access the funds from the trust, neither the beneficiary nor the beneficiary’s creditors can force the trustee to distribute assets from the trust. As a result, if the beneficiary unwisely racks up thousands of dollars in credit card debt, the credit card company cannot force the trustee to pay that debt from the trust. Additionally, the trustee can still use trust assets to benefit the beneficiary, such as paying for college tuition, without being forced to pay the beneficiary’s debts as well.2. How is a Spendthrift Trust Created
A spendthrift trust is created like any other type of trust. There is a written trust document that describes who the trustee will be, who the beneficiary is, and the purposes of the trust. The trust is then funded with money, property, or other assets. The one main difference with a spendthrift trust is that it has specific language in it that creates the spendthrift protections.
Typically, there is a paragraph, or provision, or section of the trust that specifically describes the trustees’ control over the trust assets. Additionally, this provision will state that neither the beneficiary nor the beneficiary’s creditors have any rights to the assets in the trust. Finally, this provision also typically provides specific instructions to the trustee on how and when trust assets are distributed to a beneficiary or for the benefit of a beneficiary.3. Who can use a Spendthrift Trust
Anyone can utilize and use a spendthrift trust, so long as they are not setting it up for themselves. In other words, you cannot take all your money, property, and other assets and put them into a spendthrift trust where you name yourself as a beneficiary. Doing this does not protect the trust assets from your own personal creditors.
What you can do is you can set up a spendthrift trust when you are leaving trust assets to other beneficiaries such as a spouse, or a child, other family members, or loved ones or friends. The most common situation is where a parent sets up a spendthrift trust to benefit their children particularly when they are minors, or when they suffer from addictions or are financially irresponsible. A parent could also use a spendthrift trust when they are working with a child who suffers from some sort of disability. Remember, however, it doesn’t have to be a parent that does this. It could also be a grandparent, or other family member, or it could even simply be a good friend.
A spendthrift trust is one estate planning option available to an individual who has specific needs as part of their estate planning. If you have questions about whether a spendthrift trust would benefit you and your estate plan, we can help.Enlist an Idaho Estate Planning Attorney to Help You
Our team of Idaho lawyers can help you with any of your estate planning or probate needs. Whether you are seeking to create or review an estate plan for yourself or would like to help a loved one, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a free consultation. You can also email us directly at email@example.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho Estate Planning problems.