FLORIDA SPENDTHRIFT TRUST


Leaving an inheritance directly to a beneficiary does not always make sense. Consider asset & creditor protection and wealth preservation planning for future generations


Marc J. Soss, Esq. | (941) 928-0310
​2070 Ringling Blvd., Sarasota, FL

When drafting your Florida estate plan it is important to consider inclusion of a "spendthrift trust" provision for children or beneficiaries who have a difficult time managing money or have large outstanding debts and divorce concerns. A recent appellate court decision from the Fourth District Court of Appeal for Florida confirms that a properly designed fully discretionary spendthrift trust remains one of the most effective asset protection tools available to Florida residents. In Miller v Kresser., 2010 Fla. App Lexis 6152 (Fla. 4th DCA 2010) (decided May 5, 2010), the 4th DCA found, on facts that were very favorable to the creditor, that: "When a trust document provides the trustee with complete discretion over distributions, a creditor may only reach those distributions the trustee chooses to make. §736.0504(2), Fla. Stat. (2009). The creditor may not compel a distribution from the trustee or attach any interest in the trust before the trustee makes a distribution. Id. This applies whether or not the trustee has abused his discretion in managing the trust. §736.0504(1), Fla. Stat. (2009). There is no law in Florida suggesting that a beneficiary's creditors may reach trust assets in a discretionary trust simply because the trustee allows the beneficiary to exercise significant control over the trust. It is only when a beneficiary has received distributions from the trust, or has te express right to receive distributions from the trust, that the creditor may reach those distributions. (Emphasis original)."

On May 5, 2010, the Fourth District Court of Appeal for Florida affirmed the effectiveness of a fully discretionary spendthrift trust to Florida residents and enforceability of §736.0504(2), Fla. Stat. (2009). This decision expands current Florida estate planning opportunities and methods to protect beneficiaries from future creditor claims. In Miller v. Kresser, 2010 Fla. App Lexis 6152 (Fla. 4th DCA 2010), the 4th DCA found, on facts that were very favorable to the creditor, that: "When a trust document provides the trustee with complete discretion over distributions, a creditor may only reach those distributions the trustee chooses to make. . The creditor may not compel a distribution from the trustee or attach any interest in the trust before the trustee makes a distribution. This applies whether or not the trustee has abused his discretion in managing the trust. §736.0504(1), Fla. Stat. (2009). There is no law in Florida suggesting that a beneficiary's creditors may reach trust assets in a discretionary trust simply because the trustee allows the beneficiary to exercise significant control over the trust. It is only when a beneficiary has received distributions from the trust, or has the express right to receive distributions from the trust, that the creditor may reach those distributions." Based upon Miller, a spendthrift trust provision will control even where the beneficiary of a discretionary spendthrift trust has effectively controlled the trust assets, made investment decisions, and otherwise directed the management of the trust assets, so long as there is no express authority in the trust document allowing the beneficiary to control the distribution of trust assets, This tool can serve to protect a spouse, child, extended family members (grandchildren, cousins, etc.) and future generations from creditor claims.

PROTECTION:

The protection afford is NOT unlimited as a Florida Spendthrift Trust is subject to attack for alimony and child support payments.