North Carolina residents who are concerned about keeping their money safe for future generations may benefit from creating a spendthrift trust. Such a trust could help prevent creditors from making claims against that money. It can also prevent a beneficiary from spending money unless a trustee makes a distribution. This is ideal in the event that a parent believes a child or grandchild has poor money management skills.
To create a spendthrift trust, an individual will create a typical trust with a spendthrift provision included in it. The wording of this provision will depend largely on requirements created by state law. It is generally a good idea to have an asset management company oversee how the money inside of the trust is invested. While anyone can serve as a trustee, a corporate entity may be ideal for those who have large sums of money to invest or otherwise manage.
It is important to note that most states do not allow a person to name him or herself the beneficiary and trustee of a spendthrift trust. Furthermore, the trust may need to be designated as an irrevocable trust to obtain protection from creditors. This means that the trust itself may be difficult or impossible to alter without permission from multiple parties.
A spendthrift trust is one of many ways to provide asset protection as part of an estate plan. Consulting with a financial adviser and an attorney may provide insight into other ways to protect assets from creditors or from family infighting. For instance, using a beneficiary designation might allow an asset to be transferred directly to an individual or charity as soon as a person passes. Creating other irrevocable trusts may also work to keep assets exempt from creditor legal claims.