When your kids were growing up, they all had distinct personalities and traits. Those qualities likely continue to manifest in adulthood, at least in some form. Now that it’s time to do your estate planning, you wonder how to best protect your heirs after you’re gone.
The good news is that there are ways to ensure all your beneficiaries are financially taken care of. Today, we’ll explore the option of a spendthrift trust.
Why it could work well
Spendthrift trusts are designed to keep beneficiaries’ worst impulses at bay. The principal of the trust remains inaccessible to them, their spouses and any creditors. The beneficiaries are given disbursements at predetermined intervals and amounts/percentages. These disbursements and the trust itself are managed by a trustee whom you appoint to oversee the trust in your stead.
How it could be the wrong choice for you
Not all beneficiaries need the kind of financial micromanagement that comes with the funding of a spendthrift trust. The college student who once made questionable decisions now is a married parent with a mortgage and a car on life support. They could likely be trusted to do what’s best for themselves and their family if they had access to the money.
Never put one beneficiary as trustee over another
This is one of the shortest routes there is to disaster and discord among formerly amicable relatives. If you believe that one or more beneficiaries need the structure of a spendthrift trust in place for them, choose a professional, unaffiliated individual as the trustee. Doing this can help preserve the relationships among all your heirs and beneficiaries.