Over our lifetimes, we work hard to provide the best for ourselves, for our loved ones, and for our communities. When you plan your estate, you are making sure that your wishes are followed and your interests are protected for the rest of your life and even after you pass away. It can feel good knowing that you are leaving an inheritance, but sometimes it can also be a bit stressful. In the typical estate, once your heirs inherit your money and property, they can do with it whatever they wish. Sometimes this is not a concern for clients, but some do feel uneasy about leaving an inheritance to a person who has a history of difficulty managing their money or who may be too young or inexperienced to effectively manage their money. If you want to leave an inheritance to your child or another loved one, but you worry about it being whittled away all too quickly, you have options that can bring you a great deal of peace of mind.
Protecting Your Legacy from Heirs with Money Trouble
If you are concerned that an heir is not prepared to properly manage a lump sum inheritance, do not despair. There are estate planning tools we can utilize that will allow you to leave an inheritance and have built-in protections against it being quickly spent. It is not an uncommon situation for a person to confront how to effectively leave a legacy for an heir with a history of money trouble. If you find yourself in this spot, you may want to consider establishing a spendthrift trust.
A spendthrift trust allows you to structure an inheritance so your heirs do not have the ability to spend it all at once. You can transfer the inheritance into the spendthrift trust to be managed by an independent trustee. In the trust document, you can set the terms for how and when the trustee can make distribution of trust funds to the named beneficiaries. The trustee will have control, in accordance with the terms of the trust of fund distribution, not your heir. The terms of the trust can be as specific as you want in dictating when qualifying distributions can be made from the trust and any limitations you want to place on the beneficiary’s ability to control the trust funds.
As such, the spendthrift trust paces the distributions of an inheritance so that an heir cannot spend it all at once. A spendthrift trust is also a great tool in your estate planning arsenal as it provides asset protection. Creditors of the trust beneficiaries cannot access trust funds to collect on the beneficiary’s debts or other obligations. This is because the assets held in the trust are not really owned by the beneficiaries. They are owned by the trust.
Estate Planning Attorney
Do you want to provide an inheritance for a loved one, but worry about how they would handle receiving a lump sum of money and other assets? The wonderful world of estate planning provides solutions to these kinds of conundrums! Talk to the knowledgeable estate planning team at Verras Law about your options. Contact Verras Law today.