Distributions are made only at the discretion of the trustee and the beneficiary has little to no rights to demand the assets. By having these terms in the trust, the beneficiary does not own the trust’s assets; and thus, the assets usually are not subject to creditor’s claims or divorce.

Why would anyone create a spendthrift trust?

Spendthrift trusts are usually made by a grantor who wants to leave property to a beneficiary but is worried that the beneficiary won’t use the property wisely or that he or she might get into trouble with creditors.

Who owns a discretionary trust?

the trustee
While discretionary trust assets are legally owned by the trustee, the trustee does not beneficially own the assets. The trustee must, however, manage and safeguard the assets for the general body of potential beneficiaries, but no beneficiary can demand an asset or income from the trustee.

What is the advantage of a Delaware trust?

Benefits of having a trust in Delaware include tax advantages, creditor protection, flexible distribution rules, and others. Delaware’s innovative approach to trusts helps ensure that Delaware will remain as the premier home for new or existing trusts.

What is the difference between a discretionary trust and a special needs trust?

Basically, a special needs trust is a discretionary trust designed to preserve governmental benefits for a disabled or aged beneficiary. A third-party special needs trust is one that is funded by a person other than the beneficiary.

What is a self settled spendthrift trust?

A spendthrift trust is considered to be “self-settled” when the trust creator and beneficiary are the same person. There also can be no other beneficiaries of the trust. However, there is still a trustee involved that manages and distributes the funds.

Why are spendthrift trusts legal in the state of Delaware?

For your beneficiaries. Delaware strictly enforces spendthrift trusts— trusts specifically created to protect beneficiaries from their own imprudence or incapacity—so that creditors of your beneficiaries cannot reach the trust assets other than for spousal support obligations. For yourself.

What’s the difference between a spendthrift trust and discretionary trust?

With a spendthrift trust, the trustee might be required to make disbursements in compliance with a trust document. Under a discretionary trust, however, the trustee has more control over who gets the funds. A discretionary trust typically offers greater asset protection to its beneficiaries.

Can a spendthrift trust be claimed by creditors?

To prevent seizure of trust disbursements, the trustee of a discretionary trust can pay expenses, like tuition or a mortgage, bypassing the beneficiary completely. Since the beneficiary never took possession of the money, it can’t be claimed by creditors. Spendthrift and discretionary trusts are not for everyone.

Is there a spendthrift clause in a will?

Most trusts and Wills contain a clause or paragraph regarding a spendthrift provision. Some trust provisions also provide a sentence or statement about a trustee’s ability to act in their sole discretion with regard to distribution of assets to a beneficiary.