Spendthrifts - Do you have one in the family?
A spendthrift is a person who spends money in an extravagant, irresponsible way.
Do you have a spendthrift in your family? Fortunately for you, Florida law allows you the ability to create a spendthrift trust. This type of trust is one set up by the creator (you) for the benefit of a third party (i.e., a spendthrift child). A full discretionary trust gives the independent trustee complete discretion over distributions and prohibits the beneficiary from compelling a distribution, which makes creditors unable to attach any interest in the trust unless distributions are actually made to the beneficiary.
Florida law also allows you to create a trust containing both mandatory distributions to a beneciary and a spendthrift provision. The spendthrift provision would state something to the effect of: “except as otherwise provided in this part ... a creditor or assignee of the beneficiary may not reach the interest or a distribution by the trustee before receipt of the interest or distribution by the beneficiary.” This provision prohibits a beneficiary from transferring his or her right to distributions and prevents a creditor of a beneciary from attaching the beneficiary’s interest prior to actual receipt of a distribution from the trust.
If creditor protection is a serious concern, you have other options aside from a spendthrift trust. We are happy to discuss these options with you. Please contact us at Elan.Kaney@KaneyLaw.com to schedule an appointment.