In today’s economy, more and more clients have adult children who need creditor protection. If you have children or other beneficiaries who are having problems with possible bankruptcy, judgment creditors or other creditors, you should consider protecting them with a spendthrift trust.
A spendthrift trust can be set up to take care of your children and their families, yet have the assets protected from their creditors. These are assets that you would otherwise give to your children outright during your lifetime or leave to them after your death.
These trusts often need to be tailor made to the specific situation of the beneficiary. Much depends upon the how serious the creditor problem is, the amount of the assets that will go into the trust, the type of assets, the number of children and grandchildren, the marital status of your children, their level of sophistication and if there are any disabilities, including the inability to handle significant sums of money.
It should be kept in mind that a qualified trustee is needed. Often unless the trust assets are significant, it is difficult to find a corporate fiduciary to take on the trust. Even if you can use one of the larger bank trust departments, they are charging minimum fees in the $10,000 - $14,000 range, so it expensive to have a bank or brokerage firm be the trustee.
If you use and individual trustee, it is often difficult to find a friend or relative willing to take on what may be a lifetime task with significant duties and also potential financial liability, if they do not property manage the assets. You then have to consider who will be the trustee, if the trustee that you named can no longer serve.
Once these hurdles are taken care of a spendthrift trust can give you the piece of mind of knowing that your children and their families are protected.