Philadelphia PA Special Purpose Trust Attorney
A Special Purpose Trust is a trust drafted to accurately execute a Settlor’s instructions to meet the particular needs of either the Settlor or the beneficiary. Example of Special Purpose Trusts include spendthrift trusts, trusts for those whose jobs carry a high financial risk, special needs trusts, trusts for beneficiaries suffering from mental, health or physical disabilities or as simple as instructing the Trustee to sell the trust property to pay off the debts of the Settlor or the beneficiary.
One of the realities parents have to confront when creating an estate plan is the abilities of their adult children to handle and manage money. If an inheritance will be significant, receiving all that money at once can be completely overwhelming and lead to a child making financially irresponsible decisions. For this reason, parents often choose to stagger distributions of principal over 5, 10, or 15 year periods, even if their children are middle aged and financially independent. In the event that one of your children is particularly unable to manage money wisely, a spendthrift trust is one way to ensure your child is financially secure for years to come. With a spendthrift trust, your child’s creditors cannot levy on the funds held in trust and your child is not able to anticipate or pledge the funds while they are still being held in trust. Your trustee can have the discretion to make payments as he sees fit and can distribute funds either directly to your child or pay the funds for his benefit, such as paying his health insurance premiums, medical bills or mortgage directly instead of distributing the money to your child to be used for those purposes.
Similarly, if one of your children is likely to have legal troubles, you can draft a special purpose trust to keep his or her inheritance in trust for a longer period of time so that those funds cannot be levied on by a judgment credit. This kind of trust would be appropriate for a child who has a high financial risk jobs, such as being subject to potential malpractice suits. Additionally, if you are concerned about your child getting divorced and losing a large portion of his or her assets to a former spouse, this type of trust can ensure that the funds are not available for equitable distribution and cannot be converted into martial assets.
Finally, one of the most important special purpose trusts is a trust that is drafted for the benefit of a child who has addiction or mental health issues. Your child might have periods of time when he or she is able to manage his/her finances and live independently and times when he/she cannot. By keeping the money in trust indefinitely instead of providing for certain scheduled distributions of principal, you can ensure that the money will be managed responsibly by your trustee and he will be able to make distributions directly for your child’s benefit, to ensure that the rent is paid and to ensure that he or she is receiving the health care services he or she needs, such as mental health or addiction counseling.
In the most simplest terms, every family has unique needs and one of your children may have specific unique needs that must be addressed different than your other children. A “Special Purpose Trust” requires a trustee to actively execute the Settlor’s specific, customized instructions to protect the child beneficiary with unique needs.
If you have questions about drafting a trust to meet the specific needs of your children, our experienced Estate Planning Attorney in Philadelphia can help.