A well-conceived estate plan can help to protect your assets and provide for your loved ones. But what if a beneficiary is irresponsible or lacks financial sophistication? If you have concerns that a beneficiary may spend through an inheritance, consider a spendthrift trust.
At E.A. Goodman Law, LLC, we help clients throughout New Jersey with all their estate planning needs, including protecting irresponsible beneficiaries from themselves. When you consult with us, our trust and estate attorney will explain the benefits of setting up a spendthrift trust and how the process works. We offer compassionate, effective representation, trustworthy advice, and an exceptional client experience. Contact our Morristown office today for a confidential consultation.
What Is a Spendthrift Trust?
A spendthrift trust contains a provision that limits or controls a spendthrift beneficiary’s access to the trust assets. The purpose is to prevent the beneficiary from squandering the assets and protect the assets from creditors’ claims. A spendthrift trust is well-suited for a beneficiary:
- Who can’t manage money
- Is frequently delinquent with debt
- Has a drug, alcohol, or gambling problem
- Is at risk of being manipulated
In this arrangement, the person making the trust (the settlor) appoints a trustee to manage the trust assets and provide for the beneficiary in one of two ways: either providing regular payments to the beneficiary (e.g. weekly, monthly) or paying the beneficiaries expenses and purchasing good and services on their behalf.
To be valid under New Jersey law, the trust instrument must include a provision that prohibits the voluntary or involuntary transfer of trust principal before payment or delivery to the beneficiary, The document should also declare that the beneficiary’s interest is subject to a spendthrift trust.
What is the Role of the Trustee of a Spendthrift Trust?
The trustee is responsible for managing the trust and protecting the assets from being squandered by the beneficiary. To achieve this objective, the trust should authorize the trustee to make set payments to the beneficiary on a regular basis. Similarly, the trust should permit the trustee to withhold payments under certain conditions, such as when the beneficiary gambles or accumulates debt.
Also, the trust can specify conditions for releasing payments to the beneficiary. Such conditions include making payments directly to a landlord or a creditor rather than the beneficiary or requiring the beneficiary to undergo drug or alcohol testing before receiving a distribution from
the trust (this would also require the trustee to monitor the beneficiary’s behavior).
More importantly, the trustee is considered a fiduciary and must act in the best interests of the beneficiary and preserve the value of the trust assets. In this regard, the person appointed trustee of a spendthrift trust must be honest and capable of fulfilling their duties as the trustee. A trustee is usually a family member or trusted friend, but the settlor can also appoint a corporate trustee such as a bank or law firm.
Why You Need a New Jersey Spendthrift Trust Attorney
Protecting a spendthrift beneficiary is challenging. A spendthrift trust is a complex instrument and must adhere to state law. It places a considerable burden on the trustee to monitor the beneficiary’s conduct. This makes working with our spendthrift trust attorney a wise choice.
When you meet with us, you will find a secure environment in which you can make informed decisions about your estate plan. We will handle all the details of the legal paperwork, advise you on the trustee selection process, and tailor a spendthrift trust to your unique needs and preferences.
We understand the important duties bestowed on the trustee and will ensure that the trust document clearly defines the trustee’s powers. Above all, we will provide you with informed representation and caring, efficient service, and help you create a well-conceived special needs trust that provides for your loved one efficiently and thoughtfully.
Contact Our Experienced New Jersey Spendthrift Trusts Attorney
Our trusts and estates attorneys have a well-earned reputation as dedicated advocates who adhere to the highest ethical and professional standards. We all want what’s best for our loved ones, even those who may be foolish, reckless, or irresponsible. By creating a spendthrift trust, you can provide for them in a reasonable manner and be confident that your legacy will be preserved. Contact our office today to discuss all your estate planning options.