A previous post talked about a type of trust called a living trust. A living trust is a convenient vehicle for New Jersey residents who have wealth to hand that money down to the next generation. Oftentimes, the living trust in the long term can save a family the costs of probate and may have tax benefits as well.
One type of living trust is something called a spendthrift trust, although spendthrifts trust can also be created through a person's will. While it will generally give a trustee the same leeway to distribute wealth to one's children or other beneficiaries, it will also include certain provisions that may make it harder for a child to get access to the trust funds at will.
The original purpose of the spendthrift trust is to allow parents, or anyone for that matter, to pass down their wealth to a child or young adult but at the same time to retain enough controls so that the child cannot lose too much if he or she acts irresponsibly with the money.
A spendthrift trust may be a particularly good idea when someone has a child who has proven less than trustworthy with financial affairs. They can also be a good idea even with a more responsible child, as it takes some practice and experience for even the best person to learn how to handle money really well.
Moreover, spendthrift trusts have the added benefit of being a potential shield against creditors and others who may otherwise assert claims over a family's legacy.
While a spendthrift trust is an option to consider, it is not necessarily right for every New Jersey resident. One should speak to an estate planning attorney about this and other options.