You can protect and control what you leave behind in Connecticut through estate planning. Certain individuals take care of beneficiaries by creating a spendthrift trust. Before using this type of trust, it’s important to know how it differs from other trusts.
Explaining spendthrift trusts
A trust is a legal entity that holds and distributes assets according to the owner’s wishes. A spendthrift trust works like other trusts in that it involves grantors, beneficiaries and trustees.
Why people create a spendthrift trust
Spendthrift trusts contain clauses and provisions set forth by grantors. Most people use a spendthrift trust to control how beneficiaries receive their assets. For instance, you might have beneficiaries who aren’t good with money. Spendthrift trusts are also helpful for people with mental development issues. A spendthrift trust sends beneficiaries payments on your terms, helping them prevent running out of money or spending it all at once.
Another reason a spendthrift trust is excellent for estate planning is that it protects a beneficiary from creditors. Since a trust owns the assets inside of it, most creditors can’t gain access to these funds. Instead, the trust continues distributing assets to beneficiaries on your terms.
Creating a spendthrift trust
As a trust’s grantor, you control the distribution rules of this account. Some people might allow beneficiaries to receive larger payments for certain events, such as serious medical events. Besides setting your terms, setting up spendthrift trusts is similar to creating general trusts.
You don’t need to be a millionaire or billionaire to benefit from setting up a trust. A spendthrift trust gives you peace of mind for beneficiaries who, for whatever reason, can’t properly handle large sums of assets.