A trust is a legal arrangement in which one person, called a trustee, holds property for the benefit of another person, called a beneficiary. A spendthrift trust is a special type of trust that is growing in popularity with Texans because of its flexibility and estate planning benefits.
What is a spendthrift trust?
A spendthrift trust, also known as a protective trust or a discretionary trust, is a type of trust that protects the assets of the trust from the beneficiary’s creditors. The trustee has discretion over how much money the beneficiary can receive and when they can receive it. This makes it an ideal tool for estate planning and asset protection.
Why set up a spendthrift trust?
Besides the obvious benefit of asset protection, there are a number of reasons why you might want to set up a spendthrift trust. For example, if you have children from a previous marriage, you may want to set up a trust to make sure that they are taken care of financially in the event of your death. Or, if you are worried about your estate being taxed, a trust can help you to minimize the amount of taxes that your heirs will have to pay.
How do you set up a spendthrift trust?
The first step is to decide who will be the trustee of the trust. This person will be responsible for managing the assets of the trust and making sure that the beneficiary receives their distributions. Next, choose the beneficiaries of the trust. These can be individuals, charities or even organizations. Finally, fund the trust by transferring assets into it.
A spendthrift trust can be an invaluable tool for estate planning and asset protection. With careful planning, a trust can help you to provide for your loved ones and protect your assets from creditors.