What Is a Spendthrift Trust in Maryland and What Are Its Benefits?

The aging population is expected to transfer $30 trillion in the coming years, per Forbes. According to the Survey of Consumer Finances, the median inheritance is $69,000; the median for trust fund wealth transfers is $285,000.

Many individuals planning their legacies wish to provide for their families and loved ones. Yet an Ohio State University study determined that those who receive an inheritance spend half. One-third of those who received an inheritance spent it all within two years and had negative savings. That said, a typical inheritance may not provide sustained financial security to beneficiaries.

Creating a spendthrift trust in Maryland for your loved one can limit their spending and protect wealth. While a spendthrift trust may come at the expense of their autonomy, it can provide them with greater financial security.

What Is a Spendthrift Trust in Maryland?

A spendthrift trust in Maryland protects beneficiaries who may need help managing their finances responsibly. The trust preserves the beneficiary’s inheritance for use over an extended period. A Spendthrift trust works by giving a trustee, rather than the beneficiary, the power to make financial decisions. The trustee manages the trust assets and distributes funds to the beneficiary for their needs and support.
The trust’s terms outline the trustee’s discretion in making distributions, which can be limited or flexible. The creator of the spendthrift trust, or grantor, may leave the timing and amount of distributions up to the trustee. Or, they may opt to establish a fixed schedule. These restrictions prevent the beneficiary from squandering the assets.

The Spendthrift Clause

An essential feature of a spendthrift trust in Maryland is the spendthrift clause, which protects the contents of the trust. Under the clause, the beneficiary cannot satisfy debts with their interest in the trust. Should the beneficiary have debts or a civil judgment against them, the creditors cannot obtain the trust assets.

Why Would Someone Create a Spendthrift Trust in Maryland?

You may want to provide for a loved one but have concerns about how they will use the money. This is where a spendthrift trust can serve as a suitable option. A spendthrift trust in Maryland can benefit the following individuals:

  • Children – Parents often have concerns about how their minor and young adult children will use an inheritance. Minors typically need more life experience to make independent financial decisions. Some parents want to provide for college-age adult children but worry about giving them full access to the funds. Parents can determine when their children receive the funds (for instance, when the child reaches a certain age).
  • People who are not good with money – Some adults struggle with financial planning and impulse control. For these individuals, a spendthrift trust can ensure a steady source of support.
  • Vulnerable individuals – People who are susceptible to external influences that threaten their financial well-being can benefit from the security and structure of a spendthrift trust. If your loved one has been taken advantage of before, you may worry that they will be exposed to improper influence again.
  • Those with addiction disorders – A spendthrift trust could prevent a beneficiary from exhausting the trust fund to support an addiction to gambling, illicit substances, or compulsive spending.

What Are the Benefits of a Spendthrift Trust in Maryland?

A Spendthrift trust in Maryland has several benefits:

  • Shielding assets from creditors and lawsuits.
  • Providing your loved one steady income stream without allowing them to exhaust the trust through overspending. This can be particularly helpful if you have concerns about your loved one’s ability to make money independently.
  • Preserving generational wealth and preventing your loved one from blowing a significant portion of their inheritance.
  • Encouraging responsible money habits. Providing a younger person with full access to the trust only after they turn 21 can help them develop budgeting skills. Likewise, you may choose to limit them to a certain amount of monthly income.

Consult With an Attorney

If you want to learn more about creating a spendthrift trust in Maryland to provide for your loved ones, consult with the estate planning and elder law attorneys at Elville and Associates. Through a complimentary consultation, your attorney will listen to you and learn about your situation, offer education and counseling, answer your specific questions, and create solutions and a path forward for you.


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