When you work on your Florida estate plan, you may have several goals in mind. Most people who create estate plans want to figure out how to maximize the legacy they leave behind so that it is most beneficial for those they love. However, if one or more of your intended beneficiaries has problems managing money, you may want to think about creating a trust that features a spendthrift provision.
Per the Florida Legislature, a spendthrift provision must follow certain rules and guidelines to hold up in court.
How a spendthrift provision protects beneficiaries
A spendthrift provision in a trust helps you prevent a beneficiary who is irresponsible with money from losing the money you intend to leave behind. The assets you place in such a trust technically become the property of your trustee, rather than your beneficiary, and a spendthrift provision typically includes language preventing creditors from taking possession of any assets inside the trust intended for a particular beneficiary. In other words, if your beneficiary has creditors come after him or her, or if someone wins a judgment against your beneficiary, the money in the trust remains untouched.
What a spendthrift provision does not do
There are limits to how much power a spendthrift provision in a trust provides. For example, it does not apply to enforceable support orders, such as child support obligations. Also, if the beneficiary owes money to the government due to unpaid taxes or something else, the government may still be able to collect on those debts despite the existence of a spendthrift provision.
In summary, while a spendthrift provision protects your beneficiary’s interests in the event that, say a credit card company tries to collect on a debt, the protections do not extend to all areas.