Episode 81: Myth or Legend: Spendthrift Trusts with Sally Gimon
Summary
Sometimes something sounds too good to be true, but is it? Today I talk with Sally Gimon about a tax-saving instrument that can be passed down from generation to generation. This all started in England, and is applicable in both the US and Canada - a Canadian perspective will be on a future show. Learn what a Spendthrift trust is and how to save money using it!
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Introduction
Welcome back to another episode of "My Life As a Landlord"! In this episode, I had the pleasure of speaking with Sally Gimon about a topic that has piqued the interest of many: Spendthrift Trusts. There's a lot of mystery and misinformation surrounding these trusts, so we aim to clarify what's myth and what's legend.
Understanding Spendthrift Trusts
Sally Gimon, an expert in the field, helped us break down the essentials of spendthrift trusts. These trusts are designed to protect a beneficiary’s assets from creditors and even from the beneficiary's potential poor financial decisions. It's fascinating how these trusts operate to safeguard assets while still providing benefits to the beneficiaries.
Common Myths
One of the biggest myths surrounding spendthrift trusts is that they are only for the wealthy. Sally debunked this by explaining that anyone looking to protect their assets and ensure they are used wisely can set up a spendthrift trust. It’s not about the amount of money but the intention behind securing and managing it effectively.
Another myth is that spendthrift trusts can completely shield assets from all creditors. While they do offer significant protection, there are exceptions, especially in cases involving debts like taxes or child support. Understanding these nuances is crucial for anyone considering setting up a spendthrift trust.
Legal Considerations
We also delved into the legal aspects of spendthrift trusts. Sally emphasized the importance of working with a knowledgeable attorney who understands state-specific laws. Each state has its own regulations, and a well-crafted trust needs to comply with these to be effective.
Benefits and Limitations
The benefits of spendthrift trusts are clear: asset protection, control over how and when funds are distributed, and peace of mind for the grantor. However, it’s also important to understand the limitations. For instance, these trusts cannot protect assets from certain types of creditors and might not be effective if not set up correctly.
Setting Up a Spendthrift Trust
Sally shared some practical tips on setting up a spendthrift trust. First, identify a reliable trustee who will manage the trust in the best interest of the beneficiary. Next, clearly outline the terms of the trust, specifying how and when the funds should be distributed. Finally, ensure that the trust complies with state laws to avoid any legal pitfalls.
Conclusion
Spendthrift trusts can be a powerful tool for asset protection and financial planning, but they come with their own set of challenges and considerations. Sally Gimon’s insights have been invaluable in shedding light on this complex topic. If you’re considering setting up a spendthrift trust, make sure to consult with a legal professional to tailor it to your specific needs.
Thank you for joining us on this episode of "My Life As a Landlord". Stay tuned for more insightful discussions and expert advice in our upcoming episodes!