Creating a trust is a responsible step towards securing your family’s financial future. Still, without proper safeguards, beneficiaries who may not share your financial discipline may squander your hard-earned assets.
This is where a spendthrift clause in a trust can be invaluable. This legal mechanism can provide extra protection for your beneficiaries’ inheritance.
Benefits of a spendthrift clause
Including a spendthrift clause in a trust has several advantages:
- Protects against poor financial decisions: Beneficiaries with poor money management skills cannot access large sums at once.
- Shields assets from creditors: Creditors cannot claim trust assets, even if the beneficiary has outstanding debts.
- Ensures long-term financial security: The clause allows for structured distributions, preserving wealth for future generations.
- Offers peace of mind: Knowing your assets are secure gives you confidence about your family’s financial future.
In California, spendthrift clauses are usually enforceable under the Probate Code. The law allows those who create trusts to set reasonable limits on beneficiaries’ access to trust assets. This protection covers both voluntary and involuntary transfers of beneficiaries’ interests.
Spendthrift clauses, however, are not entirely foolproof. California law permits exceptions, such as child support obligations and government tax claims. The protection level can also depend on the specific language of the clause and the type of trust established.
Securing your family’s financial future
To effectively incorporate a spendthrift clause in your trust, carefully consider how much control you want over the assets. How well do your beneficiaries manage their finances? Are there potential future creditor claims against them? Do you need some flexibility in how the funds are used in the future?
These factors will help determine the best level of protection and flexibility for your trust. Crafting a spendthrift clause correctly is essential. An improperly drafted clause may not provide the desired protection.
Working with a skilled California estate planning attorney is critical. They can help you tailor a spendthrift clause, or a trust in general, to your family’s specific needs. This way, you can ensure your legacy benefits your loved ones in the way you intend.