Trusts are a tool many individuals, known as testators, use to protect the value of their assets and for passing money and other valuable items onto their heirs. Most testators set up trusts to ensure that their assets are protected from ending up in the hands of their creditors. There are many different types of trusts. Spendthrift ones are unique in that they keep money safe from both creditors and heirs.
Spendthrift trusts are accounts that are administered by a trustee. That individual or entity manages the trust. Their responsibilities include making disbursements from it. They’re set up much the same as any other trust would be. The only difference is that the provisions in the administration documents spell out that this is a spendthrift trust and not some other type.
The provisions spell out how the assets placed into the spendthrift trust will ultimately be managed by an asset management company once the trust is made irrevocable or the testator has died. The responsibility of that company is to invest any assets contained in the trust. The registered investment advisor who serves as trustee is responsible for making sure that the trust continues to be money-generating. This means that they have to do what’s necessary to collect rents, interest and dividends on any principal assets or money placed into it.
Spendthrift trust trustees are responsible for determining what payments need to be made to beneficiaries. Their responsibility is to make sure things are handled per the trust agreement.
Any beneficiaries are limited in their control over assets contained in spendthrift trusts. They’re not lawfully allowed to spend any money or sign over assets contained in them before they’re distributed to them.
Many states don’t allow for individuals to set up spendthrift trusts. Many don’t do so because they provide creditors with very little recourse to recover money to pay off debts that you may incur. Many states don’t allow for spendthrift trusts because this financial tool allows individuals to set aside their assets for their benefit. An attorney here in Miami can advise you of whether you’re eligible to set up a spendthrift trust in Florida as well as the steps involved in doing so.