What Is A Spendthrift Trust And How Can It Help Protect My Assets?
A spendthrift trust is a document created to protect the child who is too young to control an asset or spend an asset. Sometimes a child does not care much about the money and will then spend it all. A spendthrift trust says, “No, you still get your money. However, it’s going to be allocated to you in a way that is protected from you spending it all at one time.” It is also protected from creditors that are trying to attack it and get money.
The most significant use I see of a spendthrift trust is that it cannot be assigned to anyone. So, for example, a child has a big gambling issue, and they say, “Well, I have a trust, I am going to sign this over to you, but give me this $1,000 to play on poker,” and they lose. The asset inside the spendthrift trust cannot be reached to pay off the poker debt.
What Exactly Is A Special Needs Trust And Who Is This Intended For?
Special needs individuals are anyone who has an incapacitating condition for which they will need assistance. It can be for children or adults with special needs. These are trusts designed to protect them and have assets ready for them when they need them in the future. This is one of the most significant benefits of having a trust. People you live with can have assets set aside or have those assets controlled. You can rest easy knowing that “Hey, if I go to heaven tomorrow, guess what, on earth, my son or daughter is taken care of.”
Are There Different Types Of Special Needs Trusts?
As many stars there are in the sky, there are different types of special needs trusts. You can create a trust for anything or any person in any condition. It all depends on what type of special needs trust is in question. We need to look at each individual separately and decide what kind of protection we can use to create that trust. It is designed to protect the people that need it. There are many variations of trusts for different circumstances.
What Is The Process To Create A Special Needs Trust?
You should speak with a qualified attorney about your goals and have them draft the trust accordingly. The other concern you have is putting the proper assets into those trusts. The assets can be life insurance policies, bank accounts, or special accounts for the child. Those are the crucial steps to take. The attorney will draft the document, and you will provide the funding.
Does The Type Of Disability Or Special Need Your Child Has Affect How You Structure The Trust?
It all depends on the situation. A severely incapacitated child may have more needs, require more attention, and may need more resources or longer structuring of the trust. The disability of the child or the person makes a difference in how you handle the account. It can be for any disabled person, not just a child.
Are Special Needs Trusts Always Going To Be Irrevocable?
I believe they should be because your primary goal is to protect the assets.
How Can Funds Be Spent In A Special Needs Trust?
All funds should be spent with a focus on the well-being of the special needs person. I would always suggest keeping documentation of exactly what the funds are spent on, for example, the rent payment for the special needs individual. Any funds to be used should have a record showing how you used them. While it is always wise to keep a record, this is still your trust, and there is a certain element of privacy to be upheld.
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