Shield Your Assets with a Spendthrift Trust

Many high net worth families try to pass as much of their wealth as possible to loved ones, but they may worry how those assets are used. Certain trusts can help your estate distribute assets in a way that meets everyone's needs while helping to ensure the assets your heirs inherit aren't squandered.

One such trust is a spendthrift trust. If you wonder whether your child will be mature enough to handle a significant inheritance at an early age, you might want to explore this trust.

Gradual Release

If you will pass your assets to a loved one through a trust, a spendthrift provision won’t prevent that person from receiving an eventual inheritance. Rather, this provision can delay receipt of assets until certain conditions are met. For example, the trust may require that the beneficiary receive a college degree before receiving assets. Or, assets may be released to the beneficiary over time with the hope that maturity comes with age or experience.

The trust can include any or all of the following conditions for the distribution of assets:

• The release of funds can occur on whatever schedule you like: weekly, monthly or annually;


• The beneficiary may qualify for faster release of the funds based upon not only achieving certain education, but marrying or becoming a parent;


• Payment for desired actions, such as tuition, or emergency funds, such as for medical bills.

An important aside: If the trust is irrevocable, you may be able to shield trust assets from creditors. This isn’t a minor issue if you have a child who, as the trust states, is a spendthrift and runs up high credit card and installment credit bills.

Next Steps

Because a spendthrift trust can create hard feelings, discuss with loved ones why you believe one is necessary and how they can receive assets when needed.

Choose a trustee who you can depend on, one who will follow the trust’s terms to their fullest. Also, consult your financial professional, who may recommend appropriate measures to protect your assets and make them last.

Finally, don’t forget to talk to your financial professional, estate planning attorney and tax professional to make sure the spendthrift trust achieves exactly what you want. After all, a properly drafted trust that addresses your wishes and considers the big picture is the goal.