Do you have a spendthrift in the family?
- Aug 10, 2017
- 2 min read
Updated: Jul 7
Do You Have a Spendthrift in the Family?
Almost every family has one.
The child who spends every paycheck before the next one arrives.
The adult who is constantly in debt.
The beneficiary who makes impulsive financial decisions.
Or perhaps someone who simply has never learned how to manage money responsibly.
If any of this sounds familiar, you are not alone—and Florida law provides a way to help protect an inheritance from being quickly wasted.
What Is a Spendthrift Trust?
A Spendthrift Trust is a trust designed to protect a beneficiary from his or her own poor financial decisions—and, in many cases, from the beneficiary's creditors.
Instead of distributing a large inheritance outright, you leave the inheritance in trust. A trustee manages the assets and makes distributions according to the instructions you provide in the trust agreement.
This allows your beneficiary to benefit from the inheritance without giving them unrestricted access to spend it all at once.
How Does a Spendthrift Trust Work?
Rather than receiving a lump sum, your beneficiary may receive:
monthly or annual distributions;
money for health care;
educational expenses;
housing costs;
business opportunities;
emergencies; or
other distributions authorized by the trustee.
The trustee controls when and how much is distributed, helping preserve the inheritance for years—or even a lifetime.
Protection From Creditors
One of the greatest advantages of a properly drafted Spendthrift Trust is that it can provide significant protection from many creditors.
Because the beneficiary does not own the trust assets outright and generally cannot compel distributions, creditors often cannot seize trust assets before they are distributed.
This protection may also help shield an inheritance from:
lawsuits;
judgments;
bankruptcy;
divorcing spouses;
excessive spending; and
financial predators.
While Florida law recognizes spendthrift provisions, important exceptions apply, and not every creditor claim is barred. An experienced estate planning attorney can explain how these rules apply to your family's circumstances.
Should the Trustee Have Complete Discretion?
Many parents prefer to give the trustee broad discretion over distributions.
A discretionary trust allows the trustee to decide whether, when, and how much to distribute based upon the beneficiary's needs and circumstances.
This flexibility can be especially valuable when a beneficiary:
struggles with financial responsibility;
has a substance abuse problem;
suffers from a gambling addiction;
is vulnerable to scams or financial exploitation;
has creditor issues; or
simply needs assistance managing money.
You Don't Have to Disinherit a Child to Protect Them
Parents often worry that a financially irresponsible child will waste an inheritance.
Fortunately, you don't have to choose between leaving everything outright and leaving nothing at all.
A properly designed Spendthrift Trust allows you to provide for your loved one while protecting the inheritance from poor financial decisions and many outside creditors.
Instead of hoping your beneficiary makes wise financial choices, your estate plan can provide the structure and protection needed to preserve your legacy for years to come.
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