Florida residents who are creating an estate plan may be concerned about leaving money to an adult child or another loved one who they believe may be financially irresponsible. One possible solution for this is a spendthrift thrust. This type of trust might also protect assets from third party creditors. For example, if a beneficiary files for bankruptcy, the money in a spendthrift trust may not be accessible to creditors unless it is distributed within 180 days after the bankruptcy filing.
A spendthrift trust might also protect a beneficiary's assets in case of a divorce although this is not always the case, and the assets could be used to pay child support or alimony. Furthermore, an effort to shield assets in a spendthrift trust or in a bankruptcy case could cause problems. An attorney may be able to review some of the best practices around creating a spendthrift trust to ensure that it works as it should.
For example, using the word "spendthrift" in the introduction to the trust may be important in setting up the purpose of the trust. Other specific language and provisions may be necessary as well, including not allowing the transfer of assets in the trust. Furthermore, the right trustee must be chosen to manage the trust.
Trusts are one complex aspect of estate planning, and it is important that they are set up correctly so they fulfill the function for which they are created. A trust might be used for a variety of other purposes including keeping assets safe for a minor child, donating to charity, preserving wealth across several generations, lowering estate tax, and passing a house on to loved ones at a lower tax rate.