The use of a spendthrift trust could help ensure that families in Minnesota and elsewhere don’t lose assets because of creditor claims. They can also prevent a beneficiary from squandering money or assets given to him or her by a parent or grandparent. A trustee is given authority to make distributions based on that person or entity’s interpretation of the trust’s language. Furthermore, the beneficiary would not be able to touch the principal inside of the trust.
Instead, he or she would be limited to using distributions from the trust. Creditors would only be able to take action to collect the amount of the distribution from the trust to the beneficiary. In the meantime, assets would continue to generate income that could be distributed to the beneficiary per its terms. To create such a document, an individual would create a traditional trust and add a provision declaring it to be a spendthrift trust.
Putting assets in a trust may allow an estate to minimize or eliminate the need to go through probate. The probate process may be costly and time-consuming, and it may result in legal battles that could take money out of the estate. Trusts may also be beneficial because they can protect assets from creditor claims. Therefore, a beneficiary is more likely to receive most or all of his or her inheritance.
Spendthrift trusts, in particular, may prevent a beneficiary from squandering an inheritance on controlled substances or other vices. Those who have gambling problems or other money management issues may be protected from themselves by having assets placed in an irrevocable trust. An estate planning and probate attorney may be able to help a person create a spendthrift trust or other types of estate plan documents.