Before 2006, spendthrift trusts were not used in North Carolina, but now the state has incorporated this concept. A spendthrift trust is an ideal option for the parent who wants to leave assets to their children but fears that financial irresponsibility will take hold and significantly reduce or eliminate the value of the assets. A spendthrift trust ensures that assets are transferred to the beneficiary in a way that is structured by the creator of the trust. The goal is to protect assets and have them managed in a responsible way.
In order to be valid, a spendthrift trust must restrain voluntary and involuntary transfer of the beneficiary’s interest in the trust. The wording is critical in a spendthrift trust, which is why if you plan to create one, it should be done under the guidance of an experienced attorney. The trust documents must be clear and well-written in order for the management design to be properly carried out. In addition, the terms of the money release should also be clearly articulated for efficient management. The money can be distributed on an annual or monthly basis but depending on your design, the trust can also distribute lump sums at special events, like a wedding or the birth of a child. A spendthrift trust is a perfect match for parents wishing to transfer assets to children while putting in place the protections needed for those assets.
Although a spendthrift trust cannot determine what the beneficiaries use the money for, it offers significantly more planning possibilities than a typical trust. Attorney Jonathan Meek can help you set up a spendthrift trust that meets all the legal requirements. Contact him today.
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