Clients who approach me to write their wills are often concerned with arranging their assets so as to maximize their protection against claims from their intended beneficiaries’ creditors. Luckily, Florida law favors such “asset protection planning.”
A client may, for example, set aside money or property for his beneficiary in a “spendthrift trust.” A “trust” is a legal document in which the client (the “settlor”) appoints someone (the “trustee”) to manage certain designated assets on behalf of another (the “beneficiary”). A spendthrift trust differs from other varieties of trusts in that it allows the settlor to specifically restrict his beneficiary from voluntarily or involuntarily relinquishing trust funds or property. In other words, the settlor can ensure that, after his passing, trust assets or income will neither be misused by the beneficiary himself, nor forcibly seized by the beneficiary’s creditors to satisfy his debts, even where the beneficiary files bankruptcy to discharge his debts.
The Florida legislature has, however, enacted important limitations on spendthrift trusts, so as to prevent individuals from using them to evade legitimate monetary obligations. A spendthrift trust must, for example, contain specific language to be valid and, furthermore, is unenforceable as against certain creditors, including for alimony, child support and tax debts. Also, the settlor may not create a spendthrift trust in favor of himself; if he does so, or if he retains the right to control the trust during his lifetime, the spendthrift trust is unenforceable as against his own creditors, notwithstanding the interests of the trust’s designated beneficiaries.
If you are interested in creating a spendthrift trust as part of your estate plan, I advise you to consult an experienced trust attorney or, alternatively, thoroughly study Sections 736.0501 – 736.0507 of the Florida Trust Code.