We all have strengths and weaknesses, and some people just aren’t fiscally responsible. Maybe they make seriously bad decisions with their own money. They might have a spouse who dips into the family coffers and spends it irresponsibly.
Others might have trouble with alcohol or drugs. Their problems with sobriety can lead to legal problems from car accidents and ensuing lawsuits from injured parties. The money you intended to leave them could very well wind up in the hands of accident plaintiffs or creditors.
Is there a solution to your estate planning worries?
There are, and one is funding a spendthrift trust for beneficiaries who might need oversight to get the most benefit from an inheritance. The name itself is somewhat of a misnomer because it implies the trusts are only applicable to heirs who are profligate spenders.
Spendthrift trusts provide structure and oversight
Here’s how they work. You select a responsible trustee to oversee the management of the trust. That person manages the principal, including investing so it continues to grow. They make regular disbursements to the beneficiaries according to the preset schedule you choose. In certain circumstances, they may have the discretion to increase disbursements as necessary, e.g., for a home purchase.
Who makes a good trustee?
It’s usually the better choice to pick a professional who is unrelated to the beneficiaries. Appointing a relative as trustee over their sibling’s, child’s or other relative’s inheritance can be the catalyst of bad blood between the parties.
This is just one type of financial tool you can use to safeguard your beneficiaries’ inheritance. Learning about all your estate planning options allows you to make the best decisions.