Attorneys Stephen Korshak and Lee Karina Dani

Trusts and asset protection

by | Apr 10, 2014 | Heirs & Beneficiaries |

Many people in Florida who want to leave money to their children or grandchildren may be concerned that the heirs lack the ability to manage it. The benefactor may visualize his or her beneficiaries becoming wasteful or family money ending up in the hands of an ex-spouse. Trusts can provide some forms of protection in this regard.

A spendthrift clause is commonly used in trusts as a way to protect its assets from creditors. It is a general provision that stops creditors of the beneficiary from forcing a payout even in the event of bankruptcy in most cases. However, it is possible for creditors to go after money or property that has been paid out to the beneficiary, so this is not always sufficient on its own. However, a discretionary clause can be added that gives the trustee discretion on whether or not to disburse funds.

Another way to control how the money is spent is to have a milestone or a stepping stone trust. Both of these basically make the beneficiary meet certain markers such as graduating from college, maintaining a job or reaching a certain age. Prior to these, money may only come, for example, in the form of a fixed allowance or cover only medical or educational expenses. There are also trusts that include clauses similar to those contained in prenuptial agreements that keep the money and property from ending up in the hands of an estranged spouse.

Care should be taken not to include so many of these restrictive clauses that it is seen as trying to micromanage the beneficiaries for the rest of their lives. An estate planning attorney can be a good source of information and advice on these types of trusts.

Source: Investing Daily, “Using Protection Trusts to Help Heirs“, Bob Carlson, April 04, 2014