During your lifetime, you tried to ensure that your loved ones and future beneficiaries got what they needed to lead full, productive lives. After you pass away, you want to continue to provide for them with a trust fund.
The problem is that one or more of your heirs struggles with managing their money. Maybe they live paycheck to paycheck because their disposable income is spent on vices – alcohol, drugs, gambling and other nefarious pursuits. You certainly don’t want them to use their inheritance from you to contribute to bad lifestyle choices.
A spendthrift trust ensures that your beneficiaries receive income from the trust but can’t withdraw its principal. This preserves assets for future generations and protects the assets from irresponsible or unwise spending decisions.
Spendthrift trusts can solve estate planning problems
Drafting and funding spendthrift trusts for those beneficiaries who have not shown the maturity or ability to manage their money is one option to consider when setting up your estate plan. Here’s how it works.
Choose a trustee to oversee and manage the trust for your beneficiaries. This person should be both reputable and financially savvy. They should also be able to remain resistant to entreaties from beneficiaries for access to the funds.
You choose the frequency and number of disbursements from the trust
Whether it is a single annual payment, quarterly disbursements or something else, you remain in control of who receives what and when. Your beneficiaries can never access the principal of the trust or use it as collateral for a bad investment.
Creditors cannot attach the principal to satisfy debts
If your loved one files for bankruptcy or loses a lawsuit, the principal of the trust remains protected from collection activities and liens. This way, your money continues to benefit your beneficiaries and not others.
Learning all you can about your estate planning options allows you to make the hard choices that will protect your heirs after you are no longer able.