What are the benefits of a spendthrift trust?

Thus, there are two benefits of creating a spendthrift trust:

• It protects the grantor and beneficiary from wasting or selling the assets; and.
• It protects the assets from any creditors of the beneficiary.

What happens when the beneficiary of a spendthrift trust dies?

After the grantor’s death, a successor trustee takes over and manages the trust for the benefit of the beneficiaries named by the grantor in the trust document. This language prevents beneficiaries from removing the income-producing assets from the the trust, or promising those assets to another person.

Can a spendthrift trust be broken?

In general, a beneficiary cannot change the nature of any trust. A trust with a spendthrift trust cannot be broken, which is a protection mechanism in itself. They cannot transfer the assets held by a trust into their own possession, and can only control assets that were distributed to them.

How much does it cost to set up a spendthrift trust?

Fees vary by agency, but the cost to set up a plan is typically less than $50 and the monthly fee around $35.

Can you set up a spendthrift trust for yourself?

A spendthrift trust is considered to be “self-settled” when the trust creator and beneficiary are the same person. There also can be no other beneficiaries of the trust. However, there is still a trustee involved that manages and distributes the funds.

What states have spendthrift trust?

Previously only available in offshore jurisdictions, self-settled spendthrift trusts (also known as domestic asset protection trusts) are currently authorized in 19 states: Alaska, Connecticut, Delaware, Hawaii, Indiana, Michigan, Mississippi, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota.

Can a beneficiary be a trustee of a spendthrift trust?

At most, it could be a complicated and burdensome obligation. The grantor can be the trustee of the trust or he or she can name someone else to do the job. The grantor should also name a successor trustee who would take over when the grantor dies. The beneficiary cannot be a trustee.

How is a spendthrift trust set up?

At its initial set-up, a spendthrift trust works like any other trust. You choose assets to place in the trust—money, property, etc. —and transfer them into it. You name a beneficiary, who is the person who will benefit from the trust.

Can beneficiary be trustee of spendthrift trust?

The grantor can be the trustee of the trust or he or she can name someone else to do the job. The grantor should also name a successor trustee who would take over when the grantor dies. The beneficiary cannot be a trustee.

Are spendthrift trusts valid in all states?

Creditors cannot take money from the general funds of a spendthrift trust. In fact, most states do not allow these types of trusts. Many states have laws that state that if the trust creator and beneficiary are the same person, they will not be protected from creditors like spendthrift trust funds normally are.

Are spendthrift trusts legal?

The statutes of many states recognize spendthrift trusts, and say that spendthrift provisions are valid to prevent both “voluntary and involuntary” transfers of the beneficiary’s interest in the trust. In other words, the beneficiary can’t spend or pledge the trust money, and creditors can’t seize it.

What is a spendthrift trust provision?

A spendthrift clause refers to a clause creating a spendthrift trust which limits the ability of assets to be reached by the beneficiary or their creditors. Not every state recognizes spendthrift trusts, and the ones that do differ on allowing exceptions that allow creditors to gain trust assets in certain situations.