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What is a spendthrift trust and why would you want one?

There are many different kinds of trusts Fresno County, California, residents can set up for the benefit of their loved ones or their favorite charities. Each of these trusts can serve an important purpose, and many if not most trusts have certain tax advantages and the ability to simplify the probate process.

For example, a spendthrift trust, as its name implies, is designed for the benefit of a child or other loved one who is a spendthrift, that is, someone who just isn't able to hang on to their money is highly prone to overspending, taking on too much debt and making other critical financial mistakes.

By way of its terms and conditions, a spendthrift trust provides for this sort of child whom, after all, the person creating the trust still wants to provide for and show affection to. However, it also leaves a lot of power to the trustee of the trust to decide how much, when, and on what the child or other loved one can spend trust funds. Moreover, a beneficiary of a spendthrift trust is expressly prohibited from using trust property as collateral or selling it outright in order to support an overly expensive lifestyle.

The idea behind a spendthrift trust is to transfer one's wealth to heirs, children for example, but to do so in such a way where the person creating the trust is assured the property is not going to go to waste. It also makes sure that trust property does not ultimately wind up in the hands of creditors, as the terms of the trust will prevent the property from being used to secure loans.

Depending on a person's circumstances, a spendthrift trust might be a viable estate planning option. However, setting up a spendthrift trust, as well as making the important decision that a spendthrift trust is a good idea in the first place, can involve a complicated process that is often best navigated with the help of a California attorney who has experience handling trusts.

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