Florida Estate Planning Lawyer Blog
Spendthrift clauses can be confusing to trustees. The general idea with a Florida Spendthrift clause is that the beneficiaries cannot assign their interest in the trust to a creditor ( voluntarily or involuntarily)
Here is the test found in a typical clause under the new Florida Trust Code
Spendthrift Provisions. Each trust created by this Trust Agreement shall be a spendthrift trust to the fullest extent allowed by law. Prior to the actual receipt of trust property by any beneficiary, no property (income or principal) distributable under any trust created by this Trust Agreement shall, voluntarily or involuntarily, be subject to anticipation or assignment by any beneficiary, or to attachment by or to the interference or control of any creditor or assignee of any beneficiary, or be taken or reached by any legal or equitable process in satisfaction of any debt or liability of any beneficiary, and any attempted transfer or encumbrance of any interest in such property by any beneficiary hereunder prior to distribution shall be void.
The most common application of a Spendthrift Provision is to protect against involuntary assignment or bankruptcy.
While this may be fine with a small estate, this question often comes up with larger estates.
Why would I want to void my child’s right to his 5 Million dollar distribution to avoid paying his creditors $25,000. Would it not be better in such a case to pay of the creditor and let my child enjoy and use the benefits of the trust rather than treat his a being predeceased?
Although it is not clear, the trustee can take this into consideration and make the distribution even though the creditor will receive a small portion of the decedents estate.
In these types of cases, I prefer to include language that a trustee can, in their discretion, make a payment when they know that a portion will go to a creditor of the beneficiary. Some times there is a limit placed on the amount and other times there is no limit placed on the maximum amount that can be used to pay a beneficiaries debts.
The Louisiana Estate Planning Law Blog has an article Whether you should include a “Spendthrift Trust” in your will? where they discuss using a spendthrift trust to prevent your children from loosing the money you leave to them.
If you want to make sure your children do not spend or loose all the money or assets you leave to them. It is also common to include a spendthrift provision in a NFA Gun or Firearms Trust to protect the items from being lost to a creditor. To find out more about how a Spendthrift Clause can help you Contact a Florida Estate Planning Lawyer
about including a Spendthrift Provision in your Florida Estate Planning Documents