How to Handle a Spendthrift in the Family Effectively
- Aug 10, 2017
- 4 min read
Updated: Jul 20
Almost Every Family Has One Spendthrift
What is a Spendthrift?
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.
Why Parents Choose a Spendthrift Trust
One child is financially responsible while another is not.
A beneficiary has gone through multiple bankruptcies.
A beneficiary is in an unstable marriage.
The beneficiary has a substance abuse history.
The beneficiary has special spending habits.
The beneficiary is susceptible to scams.
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.
Who Should Serve as Trustee?
Choosing the right trustee is one of the most important decisions when creating a Spendthrift Trust. Even the best-drafted trust can fall short if the person responsible for administering it lacks the judgment, experience, or willingness to carry out your wishes.
A trustee has a fiduciary duty to act in the best interests of the beneficiary while faithfully following the instructions contained in the trust agreement. This often requires balancing compassion with good judgment. The trustee may need to say "no" to requests that would undermine the long-term purpose of the trust, even when doing so is difficult.
Family Member or Professional Trustee?
Many people choose a trusted family member, such as an adult child or sibling, to serve as trustee because they know the beneficiary well and understand the family's values. Others prefer to appoint a trusted friend who has demonstrated sound financial judgment.
In some situations, however, naming a professional trustee—such as a bank trust department, professional fiduciary, attorney, or certified public accountant—may be the better choice. A professional trustee can provide experience, objectivity, and continuity while reducing the potential for family conflict.
Qualities to Look For in a Trustee
The ideal trustee should be someone who:
is honest and trustworthy;
manages money responsibly;
can make difficult decisions objectively;
is willing to follow the terms of the trust, even when faced with pressure from the beneficiary or other family members;
communicates clearly and respectfully; and
understands that preserving the trust assets for the beneficiary's long-term benefit is often more important than satisfying every request.
Can More Than One Trustee Serve?
Yes. Many people choose to appoint co-trustees, such as a trusted family member together with a professional advisor. This arrangement can combine personal knowledge of the beneficiary with professional financial or legal experience. However, co-trustees must work well together, as disagreements can delay decisions and increase the cost of administering the trust.
Naming Successor Trustees
It is equally important to name one or more successor trustees in case your first choice is unable or unwilling to serve. Life circumstances change, and having a clear succession plan helps ensure that the trust can continue to be administered without unnecessary court involvement or disruption.
Selecting the right trustee deserves the same careful consideration as deciding who will receive your assets. A knowledgeable, dependable trustee can help ensure that your wishes are carried out and that your beneficiary receives the long-term protection and guidance you intended.
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.
Spendthrift provisions are not just for children. They can also protect inheritances left to siblings, grandchildren, or other beneficiaries who may be vulnerable to creditors or financial mismanagement.
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