You are likely concerned about the long-term financial well-being of your loved ones after you are gone, especially if you have family members prone to mismanaging money or vulnerable to financial pitfalls. This could be a child with poor spending habits, a relative facing potential creditors, or someone who might be easily influenced by others.
A spendthrift trust can help ensure that an inheritance is used wisely and for the right reasons. This can help protect your loved ones from poor financial decisions, creditors or legal claims.
It puts you in control
A spendthrift trust largely works like other kinds of trusts where a trustee manages its assets on behalf of the beneficiaries. However, you can dictate how and when the trust proceeds are distributed, depending on the specific needs of your loved ones.
You can, for instance, choose to have trust proceeds distributed gradually over time or only under specific circumstances, such as for education or health care. This control helps ensure that the money is used responsibly and helps prevent beneficiaries from squandering their inheritance on impulsive or irresponsible spending.
Other added benefits of a spendthrift trust
Spendthrift trusts also help protect your assets. First, the trustee is legally obligated to act prudently and in the best interests of the trust and the beneficiaries. Additionally, trust assets cannot be transferred, sold or seized by third parties like a loved one’s creditors since they legally belong to the trust. You do not have to worry about your loved ones being left destitute due to debts or lawsuits against them.
Legal guidance is essential when setting up a spendthrift trust or any other trust because the details matter. It can help tailor your estate plans to your unique circumstances, family situation and long-term objectives.
