If you have a child that has trouble handling money, is mentally disabled, has marital, debt or credit problems, a spendthrift trust may be the estate planning solution. A parent places the money in a trust to be managed by a trustee, who can be a relative or a friend. In some trusts, the trustee controls over how and when the trust principal and income is distributed to the beneficiary. In other trusts, the amounts are pre-determined by the trust creator.
The troubled child cannot assign any future rights in the income received from the trust, sell his or her rights to the principal to any creditors or squander the money.
For the most part, creditors can only get at the portion of income that is paid to a beneficiary and not the principal. However, there are exceptions to when creditors may access the trust principal, which can be found here.
The creator of the trust usually grants the trustee broad powers over the management of the trust funds so that the trust only releases money that is necessary for necessary living expenses, health care, education and other special needs of the beneficiary. Therefore, you could appoint one or more of your other adult children to act as the trustee or co-trustees to manage the trust assets in order to protect the trust assets from claims by creditors, your troubled child’s spouse or from the troubled child depleting trust funds.
A New York probate and estate attorney can set up the spendthrift trust for you.
Primary Advantages of a Spendthrift Trust
Setting up a spendthrift trust gives you the peace of mind that your troubled child will be taken care of financially and the trust assets will be properly managed and protected. A spendthrift trust provides the following primary advantages:
• To provide lifetime income to a troubled child
• To protect the trust assets from creditors and the spouse of a troubled adult child
• Stop the troubled child from depleting trust fund assets
You cannot set up a spendthrift trust for yourself in order to avoid paying your creditors.
Hiring a New York Estate Attorney
If you wish to set up a spendthrift trust for a troubled child, you will need to make a list of the assets that you want to transfer to the trust and contact a New York estate attorney to help you prepare the spendthrift trust. A New York estate attorney can also assist you with other estate planning, routine probate matters, estate litigation and tax matters. If you wish to speak to a New York estate attorney, call the Law Offices of Albert Goodwin at 718-509-9774.