A person in Nevada who is creating an estate plan and is concerned that an heir might be irresponsible with an inheritance may want to consider setting up a spendthrift trust. This allows the heir to receive distributions from assets in the trust, but a trustee controls when those distributions are made.
A trustee in a situation like this may be a professional or a corporation, such as a financial institution. The grantor, or individual who creates the trust, may want to choose an asset management company to manage the trust investments. An heir cannot use a spendthrift trust as collateral in a loan, and the assets cannot be seized by the beneficiary’s creditors.
Spendthrift trusts are created in the same way that regular trusts are, but they require a spendthrift provision. It may be best to work with an attorney on this to ensure that the language used is correct and in accordance with Nevada law. In general, the law prohibits a person from creating a spendthrift trust and making him or herself the beneficiary.
In general, the key with a trust that places assets outside the reach of a grantor’s creditors is that the assets must be outside of the grantor’s control. This is called an irrevocable trust. A spendthrift trust can be revocable or irrevocable, but if it is revocable, it is not protected from the grantor’s creditors. There are a number of other types of trusts a person can set up as well depending on his or her goals. For example, a special needs trust is a way to leave money to a family member who receives government assistance without making the person ineligible for that assistance. This is because the inheritance remains in the trust’s name and not in the person’s name.