A spendthrift trust is a trust created for the benefit of a person, usually an adult child, with a provision to prevent transfers from the trust without the authority of an independent trustee. When a relative or parent is concerned that a beneficiary cannot control his or her spending, a spendthrift trust may be appropriate to ensure that trust funds are well spent and last over the intended period of time. Because spendthrift trusts are technically left to the trustee, they go further by protecting the trust from creditor judgments against a beneficiary.
Parents who willing and able to leave their children money in a trust may include a spendthrift clause for a child that has demonstrated poor judgement financially or otherwise, or for an adult child who is very young who lacks experience with handling finances. They may name his or her sibling or other relative as the trustee who will distribute funds to or on behalf of the beneficiary.
In a divorce scenario, it’s not unheard of for a beneficiary to a provisional trust to direct the trustee to pay any and all debts while ignoring a child or spousal support or put distributions on hold altogether in an effort to protect the assets in a divorce. They may have even convinced their soon to be ex-spouse that they have zero rights to the assets because the funds are out of the beneficiary’s control. However, more often than not, courts will order child support and spousal maintenance to be paid directly with the assets of the trust, compelling the trustee to make court ordered payments to meet the beneficiary’s obligations.
Whether your spouse has a trust, or brought a home or separate business into the marriage, it is crucial to take a closer look. Division of marital assets may include payment for direct or indirect actions that increased the value of separate property. Separate property may have transmuted to marital property during the marriage. Trusts may be considered income when calculating child and spousal support payments or may be tapped to fulfill a payor’s obligation to support their children. Because there are various financial instruments and property, it is important to work with an experienced attorney to ensure that you get all that you are entitled to in a divorce. When you have questions regarding trust funds for child and spousal support, contact the Libertyville family law offices of Ronald L Bell & Associates for help at 847-495-6000.