You love your family, which is why you want to create an estate plan that provides for them as you see fit. But you might have hesitations about how to leave those assets to your loved ones, especially if one of your family members has a demonstrated history of money woes and financial mismanagement.
But these concerns don’t have to drive you to disinherit your loved one out of a desire to protect the integrity of your estate. Instead, you can use the estate planning tools at your disposal to ensure that you safely pass down your wealth while ensuring that inheritances won’t be squandered away.
How to protect your estate assets from being quickly spent away
Fortunately, the estate planning process gives you several ways to protect assets from mismanagement. One of the most effective is the spendthrift trust. Here, assets are incrementally released from the trust to ensure that your loved one receives long-term financial support without giving them the opportunity to waste their inheritance away. A spendthrift trust also protects assets within the trust from being accessed by your loved one’s creditors.
When is a spendthrift trust appropriate?
Anytime you have a concern that an inheritance will be spent down more quickly than you’d like. This may include situations where your beneficiary:
- Doesn’t understand how to make wise financial decisions.
- Frequently makes impulsive purchases on a large scale.
- Is struggling with overwhelming debt.
- Suffers from and addiction that could eat away at their inheritance.
The list could be much longer than this, so use your best judgment, keeping in mind what you ultimately want out of your estate’s distribution scheme.
Create the estate plan that brings your vision of the future into reality
Your estate plan can be customized to suit your needs. Therefore, it’s a good idea to educate yourself on the estate planning tools available to you. Only then can you make the estate planning decisions that are best for you and your beneficiaries. If you have questions about the best way to create your estate plan, then be sure to read up on the process and your options, and discuss the matter with your attorney if you need to do so.