Spendthrift trusts may be helpful for individuals who file for bankruptcy in Texas but who later receive an inheritance shortly after filing for bankruptcy. In many cases, it is likely that assets from an inheritance received within 180 days of filing for bankruptcy will be used to pay off creditors, or will in some way affect a debt repayment plan.
This is unsettling news for many who inherit money, but a spendthrift trust may actually help protect this money. Before making any legal or financial moves during bankruptcy in Texas, though, individuals should consult a financial professional and/or Plano bankruptcy lawyer.
Setting Up a Spendthrift Trust
A spendthrift trust is a trust to which the beneficiary (heir) has limited access. The person setting up the trust creates it in such a way that a trustee is in control of what the beneficiary receives. This type of trust is often recommended in cases where the beneficiary is thought to be likely to squander the inheritance, but it can also be useful in cases where the beneficiary has creditors who might attempt to come after the inheritance to satisfy debts.
The trustee makes payments to the beneficiary or makes purchases for the beneficiary from funds in the trust. This way, the beneficiary is not officially in control of the funds and his or her creditors cannot pursue the assets to collect on debts even though the individual has filed for bankruptcy.
Setting up a trust is a task that may require the professional assistance of a financial expert and consultation with a Plano bankruptcy lawyer. Contact a Plano bankruptcy lawyer to talk about the bankruptcy process and, if expecting an inheritance, creating a spendthrift trust as well as any other issues pertaining to financials and how they impact bankruptcy in Texas.