Spendthrift Trusts in Estate Planning

Just about everyone knows one or more individuals who are simply unable to manage their own finances. Whether they are bad at living within their means, or they have no concept of saving for a rainy day, any money that they have is spent, taken by creditors, or wiped out by an unexpected emergency for which they haven't properly planned. As Virginia estate planning attorneys, we are often approached by our clients who have concerns about handing over a substantial amount of wealth to friends or family members who have exhibited this type of behavior. Fortunately, there is an instrument called a "spendthrift trust" that estate planning clients find useful when faced with this predicament.

What a spendthrift trust does is place assets in an account for a beneficiary. That beneficiary has no actual ability to get at those assets without third party approval. A fiduciary or trustee is designated to release funds for the needs of the beneficiary when he or she sees fit. The assets of the spendthrift trust can't be accessed by creditors to pay the beneficiary's debts. That's not to say that the trustee can't pay debts. It might be determined by the trustee that paying off debts would be in the principal's best interest. The trustee just can't be compelled by creditors or the beneficiary.

Although trusts can be used for a number of different types of situations—for the care of minor children, disabled adults, elderly parents, et cetera—the spendthrift trust is unique in that the beneficiaries are usually able to take care of themselves, but for whatever reason, the benefactors have chosen not to allow them to have control over their own funds.

Consider the following example. A Fairfax, VA businessman is planning his estate. He has a great deal of confidence in his wife and daughter, but knows that his son has struggled with addiction in the past. What's more, although neither of the women would be likely to give the son money to fuel his addictions, they would probably try to bail him out of financial trouble. The problem is that if the son were to receive his inheritance, the money would likely give him enough freedom to return to his self-destructive lifestyle. An experienced Virginia estate planning attorney could establish a spendthrift trust on behalf of the son. That way, if he were to need money for college or a car, the trustee could release funds specifically for that purpose, but that money wouldn't be available for frivolous spending.

Spendthrift trusts are just one of the many tools that can be used by qualified, professional estate planning lawyers to help give their clients the peace of mind that they are seeking. To discuss trusts and other estate planning issues, contact an experienced Virginia estate planning attorney.