Spendthrift trust

[timadous]

My father's health has deteriorated since the 341 on Dec 13th. Day 180 is may 4th. I am a bit nervous.

There is a living trust and some insurance policies.

I have just learned about spendthrift trusts. Would one have to be set up before he dies or can the executor set this up post mortum? Can insurance policies be paid into such a device?

[Fallonedward]

My father set one of these up for his children. Upon his death, distributions would happen at age 40, 50 and 65. It is not a lot of money but he did it to protect one of my sisters who at the time had a very strange hubby. The hubby really thought he was going to be in the money once dad died but once he learned he's have to stick around for 10 years before the first payout of 20% would happen, he took off.

[chicagoannie]

My father set one of these up for his children. Upon his death, distributions would happen at age 40, 50 and 65. It is not a lot of money but he did it to protect one of my sisters who at the time had a very strange hubby. The hubby really thought he was going to be in the money once dad died but once he learned he's have to stick around for 10 years before the first payout of 20% would happen, he took off.

Where was the money in the meantime - is a bank appointed trustee? Does the inheritance earn interest? I never heard a=of a spendthrift trust. I have a friend who is terminally ill and both her adult children have serious addiction problems. We have discussed the fact that both addicts will burn through their inheritances within 2 years. I wonder if something like this could at least insure they'd have money coming in spread out over some years. Interesting.

[Flamingo]

Early in my career I worked heavily in estate work. Due to the timing of this and the fact that your father would have to change his will or do a Codicil to make the change, and that you filed bankruptcy prior to any change, I would highly, highly suggest you consult with an Estate lawyer about this situation.

[Fallonedward]

My dad had his set up with a trustee (his lawyer being the trustee) It is set up that we would have use of the money, for health, education, maintenance and support, but not full access to it till age 65. I'm pretty sure its held in a bank that gives interest because its worth a lot more today then it was 15 years ago at the time of my fathers death.

Where was the money in the meantime - is a bank appointed trustee? Does the inheritance earn interest? I never heard a=of a spendthrift trust. I have a friend who is terminally ill and both her adult children have serious addiction problems. We have discussed the fact that both addicts will burn through their inheritances within 2 years. I wonder if something like this could at least insure they'd have money coming in spread out over some years. Interesting.

[AngelinaCat]

'Hub and I have a irrevocable trust that has 'spendthrift language' in it. We funded it through the sale of some property ten years ago--WELL before the situation arose that drove to BK. We get a yearly stipend from it that is part of our Retirement Planning. We studied the matter long and hard before we decided to take this course of action, and then we found the best possible Land/Estate Planning attorney in our area to set it up for us.

Flamingo is right. The timing is everything here. You have to be very careful with this idea.

I only wish we had taken the due dilligence to search our our BK attorney as we did with our Land/Estate Planning attorney. But at the time, we were half insane, and recovering from 'Hub's prostate cancer....

[timadous]

That is exactly the purpose of a sprendthrift trust.

[AngelinaCat]

A spendthrift trust is a trust that is created for the benefit of a person (often because he or she is unable to control spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary. Creditors of the beneficiary generally cannot reach the funds in the trust, and the funds are not actually under the control of the beneficiary.

The creator of a trust (whether or not it is a spendthrift trust) is sometimes called the "trustor", "grantor" or "settlor" of the trust. A trust often will not be treated as a spendthrift trust unless the trust agreement contains language showing that the creator intended the trust to qualify as spendthrift. This is what is known as a spendthrift clause or spendthrift provision.



A spendthrift provision in an irrevocable trust prevents creditors from attaching the interest of the beneficiary in the trust before that interest (cash or property) is actually distributed to him or her. Most well drafted irrevocable trusts contain spendthrift provisions even though the beneficiaries are not known to be spendthrifts. This is because such a provision protects the trust and the beneficiary in the event a beneficiary is sued and a judgment creditor attempts to attach the beneficiary's interest in the trust.

There is more info in the link copied. 'Hub

http://en.wikipedia.org/wiki/Spendthrift_trust