What is a Spendthrift Trust? Fifth DCA Case.

Are you drafting a trust in West Palm Beach? Have you considered   adding a spendthrift provision? Did you know they can protect your trust funds from reckless relatives and creditors alike?Check out what the Fifth District Court of Appeal had to say about spendthrift trust provisions and protection from creditors.

Spendthrift Provisions

• A common provision in most trusts is the spendthrift provision.
• A spendthrift provision invalidates an assignment of trust assets to a third party before said advance is due.
• In other words someone cannot enforce such an agreement in court.
• Sometimes the entire purpose of a trust is to prevent abuse by a spendthrift relative, these are often called spendthrift trusts.
• Palm Beach probate litigators know that a spendthrift provision is a wise choice regardless of whether or not a beneficiary has money problems.
• Do you know why?
• Another great thing about spendthrift provisions is that they can provide protection from creditors.
• Do you see how?
• Look at what happened in the 2013 case of Zlatkiss v. All America Team Concepts, LLC.

Zlatkiss v. All America Team Concepts, LLC.

• A creditor brought an action against a trustee of a spendthrift trust after the trustee refused to make distributions upon learning that the trust beneficiary, as principal of a debtor corporation, had signed a personal guaranty for a loan that had gone unpaid.
• A personal guaranty means that he would have to pay himself rather than through corporate funds, which could make trust funds fair game.
• The creditor tried to make a constitutional argument that the creditor had frustrated his access to courts, but that did not go to far.
• Do you see how powerful the spendthrift provisions were?
• That trustee had the discretion to stop distributions and once he learned about that debt that’s exactly what he did.
• Do you have any kids you are leaving in your West Palm Beach estate that are not the best with money?
• Have you considered a Palm Beach Spendthrift Trust?

Want to learn more? Check out the entire case by clicking here.