Spendthrift Trust Lawyer in California
At LA | Estate Plans, our spendthrift trust lawyer based in Los Angeles, helps clients create comprehensive estate plans that meet their needs and expectations. A spendthrift trust is one such tool you can add to your estate plan if it makes sense to do so. Schedule Your Peace of Mind Planning Session to see if a spendthrift trust would complement your estate plan and help those you love but who need help managing their money.
Understanding California Spendthrift Trusts
A trust is a fiduciary relationship in which a party, known as the trustor, gives another party, known as the trustee, control over a group of assets. The trustee is responsible for managing and distributing those assets for the beneficiary, or beneficiaries, pursuant to the terms of the trust.
The interest of any Beneficiary of this Trust in the income and principal shall not be subject to claims of his or her creditors, or others, or be liable to attachment, execution, or other process or law and no Beneficiary shall have the right to encumber, hypothecate, or alienate his or her interest in any of the trust in any manner except as provided herein. Nor may a creditor compel a trustee to make a discretionary transfer to a beneficiary. Where the trustee is also a beneficiary, restraint on transfer is invalid against transferees or creditors of the Trustor. In no case shall a disclaimer by a beneficiary be considered a transfer to that Beneficiary. The interest of the Beneficiary is held subject to a spendthrift trust. No interest in the Trust Funds established pursuant to this Agreement will be transferable or assignable, voluntarily or involuntarily, or be subject to the claims of Party A or its creditors, PNM or its creditors, or SJCC or its creditors other than as provided in the Mine Reclamation Agreement.
Two important points about spendthrift trusts exist, and they are:
- Beneficiaries cannot give away or take loans out against the trust funds or assets; and
- Creditors cannot access trust funds or assets.
These two points are the reason why so many opt for spendthrift trusts because other trusts do not provide the same combination of benefits and controls.
Who Creates Spendthrift Trusts in California?
Who Are Good Beneficiaries of Spendthrift Trusts?
Though anyone can benefit as a beneficiary of a spendthrift trust, it is best suited for someone who:
- Cannot manage money well
- Cannot be trusted with a large sum of money
- Spends way more money than they should
- Has a disability as an adult that interferes with their ability to manage finances on their own
- Has a mental illness that interferes with their ability to manage finances on their own and/or induces bad judgment, especially in terms of money
- Has an addiction, like gambling, drugs, and/or alcohol
The beneficiary of a spendthrift trust is someone whom you want to help financially but who cannot responsibly manage finances, so you need to protect their inheritance for them.
How Does a Spendthrift Trust Work in California?
Choosing a Trustee of a Spendthrift Trust
Pros of a Spendthrift Trust in California
Many advantages of a spendthrift trust exist, and most of those benefits have already been addressed. Here is a summary of the benefits to keep in mind when deciding what you want to do:
- When a beneficiary exhibits negligent spending habits, the spendthrift trust can prevent them from squandering their entire inheritance at once.
- A spendthrift trust can protect the beneficiary’s inheritance from creditors.
- A spendthrift trust may bypass the need to go through probate.
The terms of each spendthrift trust may be customized, as allowed by state law, to meet the needs of a particular situation.
Cons of a Spendthrift Trust in California
There are some disadvantages to using spendthrift trusts in some states. Below are some of the disadvantages to keep in mind as you determine how you want to set up your estate plan:
- Some debts, like alimony or child support, may not be exempt from a spendthrift trust.
- A spendthrift trust may be irrevocable, meaning that the trustor is not able to make changes whenever they wish.
It is important to speak with an attorney in your state regarding the laws and provisions that regulate spendthrift trusts in your jurisdiction.
Contact an Estate Planning Attorney in Los Angeles Today
At LA | Estate Plans, our estate planning lawyer based in Los Angeles will help you create a spendthrift trust that satisfies the law and your needs. Schedule Your Peace of Mind Planning Session to learn more.