Spendthrift Trust

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Suppose you have a child or another beneficiary (this does not include YOU!) who easily gets into financial difficulties, e.g., credit card debts, finance company debts, etc. Well, if you leave some money to this person, the creditors can easily get it. To avoid this you set up a Spendthrift Trust, usually within your Revocable Trust that controls the distribution to the beneficiary. Should the beneficiary be forced into bankruptcy, the trust can be set up in such way to protect the beneficiary’s interests from the bankruptcy creditors. Some of the beneficiary’s debts that cannot avoided this way are: court ordered spousal and child support, state and federal taxes, and the attorney who set up the trust or other professionals who acted to protect the beneficiary’s interests.