Most of the time, we have the best intentions when deciding who will get our property after we’re gone. A well-crafted, comprehensive estate plan can give the maker a sense of accomplishment, contentment, and serenity. During the estate planning process, though, people start to ask some hard questions about their heirs: Are my loved ones able to manage receiving a large sum of money or valuable property? Are they so fiscally irresponsible that an inheritance will be frittered away with nothing to show for it? Fortunately, we can use estate planning tools like a spendthrift clause to provide long-term protection for any irresponsible heirs in our family trees.
A spendthrift provision in a will or trust protects against the “imprudence, extravagance, and inability to manage financial affairs” of a beneficiary. Under Florida statutes, this type of provision is only valid if it stops both voluntary and involuntary transfer of the beneficiary’s interests. If the trust document prohibits the beneficiary from voluntarily transferring funds from the trust, creditors cannot involuntarily remove funds either.
The spendthrift clause prevents beneficiaries from squandering their expected inheritance. Heirs are unable to promise trust funds to third parties. This clause may also afford the beneficiaries some protection from creditors and lawsuits.
In addition, spendthrift provisions may be useful in special needs planning. If an heir is considered disabled or has a potentially disabling condition, money can be set aside for future treatment and care. Spendthrift language in a special needs trust, for example, provides much needed protection for the beneficiary.
For beneficiaries who work in high liability professions, spendthrift trusts can provide a layer of protection between their inheritance and civil judgments. If your son gets sued for medical malpractice and loses the lawsuit, his inheritance will usually be safe.
When deciding how much will be given to your heir at scheduled intervals, remember that the protection of the spendthrift provision ends when your heir receives his or her disbursement. Once the beneficiary receives a distribution from the trust, it become fair game for creditors.
In some circumstances spelled out in the Florida Trust Code, spendthrift provisions may be unenforceable against:
(a) A beneficiary’s child, spouse, or former spouse who has a judgment or court order against the beneficiary for support or maintenance.
(b) A judgment creditor who has provided services for the protection of a beneficiary’s interest in the trust.
(c) A claim of this state or the United States to the extent a law of this state or federal law so provides.
While preparing your estate plan, remember that some of your beneficiaries might need protection from themselves or others. Thoughtful use of spendthrift language in a Will or trust may mean heirs receive and retain more of their inheritance.
Do you question the need for attorney guidance with so many online resources? Because laws and regulations are complex, and because every person has a lot at risk, more people than ever are seeking professional guidance from an experienced, knowledgeable source. That helps explain the rapid growth of our firm. Whether you happened upon this website by accident or are one of the many referrals we receive from a nearly 15-year collection of satisfied clients, our staff can provide customized estate planning guidance for you. Call us. Our number: 1 (772) 218-0480