You love your family, and you want your hard work and wealth to benefit your family However, one of your heirs has some issues that could undo all your plans.
If you’re worried about leaving an inheritance to an heir who has a problematic relationship with money, it may be time to consider a spendthrift trust.
What’s a spendthrift trust?
A spendthrift trust is a trust that’s specifically designed to limit a beneficiary’s access to the funds in the trust according to whatever provisions you leave. Spendthrift trusts help protect beneficiaries from their worst instincts or habits and insulate them from creditors’ claims.
Spendthrift trusts are useful in a variety of situations, including those where the intended beneficiary is:
- Young and inexperienced in handling and investing large sums of money
- Impulsive and prone to reckless investment decisions or purchases
- Someone with a history of poor money management
- A compulsive spender who is already heavily in debt
- Naive and unsophisticated enough to easily be defrauded or fooled
- Suffering from an addiction to drugs or alcohol
- Prone to romantic relationships that end badly
It’s possible to set the trust up so that the money is released in set increments over time or so that the trustee has broader discretion. In the case of a beneficiary who shouldn’t have access to any direct funds (like one with an addiction), you can also arrange for the trustee to pay their bills directly.
There are many types of trusts, and they’re customizable to meet unique needs. They’re not just for the uber-wealthy. If you’re ready to get your estate plan in order, learning more about your options can help.