Numerous situations exist where a family member wishes to pass down their estate to another party but does not want to relinquish full control over it. In some situations, you may be concerned about a person’s spending habits or wish for the funds to be used in a way that is within your expectations. Other times, you are concerned about how your business may be handled. A spendthrift trust could be an option for you. Are spendthrift trusts valid in Florida?
At The Siegel Law Group, you can work hand-in-hand with a Boca Raton Estate Planning Attorney who can provide you with very specific goals on how to manage your financials and estate, including the use of trusts.
What Is a Spendthrift Trust?
A spendthrift trust is a legal strategy that allows asset owners to transfer their assets to a named beneficiary with a number of restrictions and covenants. These trusts contain a spendthrift provision. That means that the trustee, a third-party person in charge of the trust, is given specific instructions on how the funds within the trust can be accessed and used by the beneficiary.
What Circumstances Would Benefit from a Spendthrift Trust?
Though it is wise to work with our Estate Planning Attorney in Florida to make decisions about your specific situation, many people will find there are clear benefits to investing in a spendthrift trust.
One of the reasons to utilize a spendthrift trust is to protect assets from creditors. If the beneficiary has a significant amount of debt or there is the concern that they may have debt in the future, this asset protection tool minimizes the risk that creditors could pursue the trust to repay those debts. In these trusts, the beneficiary’s creditors cannot seize the assets for any purpose.
Another key advantage to the use of spendthrift trusts has to do with reckless spending. If the party is noted for frivolous spending, or you wish to protect from this potential concern in the past, a spendthrift trust can be utilized. It allows for the funds within the trust to be controlled by a third party, which is governed by the rules that the trust creator determines. That means that the trustee is able to minimize the amount of spending, protecting the asset long term.
Minimizing Risks in Divorce
In some situations, a spendthrift trust can also be helpful in protecting assets held within it from divorce proceedings. The assets held within the trust are not considered marital property (in most situations) and, therefore, cannot be counted as a property division component. In situations where there is concern about divorce, a spendthrift trust may help to protect the beneficiary’s assets.
Are Spendthrift Trusts Valid in Florida?
Spendthrift trusts are valid and enforceable in the state of Florida. However, there are some limitations to this. Specifically, the trust is only enforceable when it restrains both the voluntary and involuntary transfer of assets in the trust, as defined under the state’s estates and trusts laws.
The key here is to note that once the trustee releases funds from the trust, the beneficiary receives them, and at that point, those assets can then be claimed by other parties, such as creditors.
There are also some situations where exceptions to the enforceability of a Florida spendthrift trust exist. For example, this provision cannot be enforced if there is an enforceable support order on the beneficiary. For example, it cannot be used to shield assets from paying for child support orders. In addition, if the beneficiary owes money to the state or the federal government, this provision also does not apply.
How to Set Up a Spendthrift Trust
The establishment of a spendthrift trust can be a viable way to protect assets in the state of Florida. However, it takes some careful planning to ensure the process is done properly to ensure it is enforceable within the state.
The creation of a spendthrift trust is no different from the creation of any other type of trust. The only difference is within the language of the trust, which contains the spendthrift provision. This is the specific provision within the contract that outlines how the trustee will maintain control over the assets. As a result, one of the first steps in this process is to work with an Estate Planning Lawyer to determine the specific provisions desired, including when and how the funds can be assessed and used. Once these are determined and they fall within the law, an Estate Planning Attorney can draw up the trust documents.
Here are some examples:
- The party is allowed to receive a specific amount of funding each year.
- The trust may stipulate at what age the funds may be accessed.
- The trust terminology can make specific statements about what the beneficiary can spend the funds on.
This decision is rightfully up to the trust creator based on your wishes and goals. Keep in mind that the trustee is a third party that oversees the trust. Their job is to follow the specific rules that you put in place and not to make their own decisions about when it is right or wrong to issue access to the funds. For that reason, it is critical that you take steps to ensure your wishes are fully understood.
Call THE South Florida POA and Estate Planning Attorneys – The Siegel Law Group
The best way to ensure your goals are met when it comes to protecting your money and assets is to create a trust with the help of an experienced Estate Planning Attorney. Spendthrift trusts are legal in Florida, but they must be created properly to protect your rights and ensure that your wishes are carried out properly. By working with our legal team at The Siegel Law Group, we can ensure this is the case.
Call our office at (561) 576-6206 to schedule a complimentary consultation, or submit our online contact form to schedule a consultation today. If you have any questions, do not hesitate to contact us.