What Is A Spendthrift Trust?

What Is A Spendthrift Trust?

Concerns about the well-being of one’s own child are quite natural. This is especially true if the son or daughter is severely disabled and requires long-term care.

Therefore, parents must ensure that their child is well cared for after their demise. Creating a spendthrift trust has proven to be a viable solution. Since inheritance law does not provide for such a form of estate administration by default, there are a few things to keep in mind.

The prerequisite for a trust is that the relatives – usually children – are severely impaired mentally or physically that it is impossible for them to earn their own living and their entire life will depend on care services. As a result, social authorities automatically have a right to it.

These can be care providers, such as the Social Welfare Office or a nursing home where the child lives. The disabled child would have to pay for his or her own care. In fact, this would not change anything: the money earned and saved by parents over decades would simply be used up without the child being able to afford amenities.

Inherited real estate, such as the family house, would have to be sold if necessary. A specially designed trust regulates the whole so that the child can continue to receive welfare benefits and at the same time has some of his inheritance. This is important for anyone looking to understand answers to the question – what is a spendthrift trust?

What happens without a trust?

If the testators have not written a will specifically tailored to their disabled child, part of the hereditary property belongs to the responsible social welfare providers. The same applies if there is no will at all and the legal succession comes into force. This step is justified in the so-called subordinate principle.

The need or subordinate principle is part of the social code and is part of the rules for basic social security. A trust is understood in the legal literature as a last will, which is written especially by parents of disabled children and contains special rules in relation to the disabled child. The purpose of this injunction is to give the heir, despite his inheritance, full state support without having to use the inherited assets. The legal way to this lies in the order with simultaneous execution of will.

People with disabilities often receive social benefits that are income- and asset-related (eg integration assistance for disabled people). If the beneficiary inherits assets that exceed the amount of the protective assets the entitlement to receive any assets-related social benefits ceases. Only when the inherited assets have been used up to the level of the protective capacity can social assistance payments be resumed.

To avoid such a fact, the testamentary arrangement of the fore-inheritance is usually recommended. The disabled person is used only as a forerunner and other persons as a heir. This is based, on the one hand, on the fact that the non-exempt according to the inheritance law is limited in its right to dispose of property, in particular real estate.

In order to allow inheritances from the inheritance and to prevent the direct attachable access of the disabled person to the estate, the parents must also appoint a perpetual executor.

This executor then takes care of the handicapped and gives him something from the inheritance. In this case, the owner of the estate has access to the inheritance should also be established by naming various occasions and occasions: birthdays, outings or hobbies.

It is important for the function of this legal construction that the allowances granted by the executor of the estate always relate only to objects of the protection of the disabled person according to the social law provisions.

The social assistance is thus prevented from accessing the estate, because on the one hand the disabled person is only a fore-heir and on the other, the benefits granted to him under social law must not be infringed. This is vital when it comes to the question – what is a spendthrift trust?

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