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Is a ‘spendthrift’ trust the answer to your estate problems?

| Oct 6, 2020 | Trusts

You love your child, but you aren’t blind to their problems. Maybe they have a substance abuse disorder, a gambling problem or just make one poor financial decision after another in life. You want to provide for them after you’re gone, but you’re worried that everything you leave behind will be foolishly spent. It’s hard to find any peace of mind over the issues.

A spendthrift trust might be the solution. Spendthrift trusts make it possible for you to provide for an heir without putting all of the money directly in their hands at once.

Instead, a trustee is given authority over the trust and the ability to dole out the funds according to your wishes. While you do have to rely on the trustee’s good judgment, you can leave behind guidance about how and when your heir should be given access to that money. You can, for example, dictate a limit on annual disbursements or decide that they can access any amount necessary for medical expenses.

In addition to keeping the bulk of the money out of your heir’s hands, a trust can also keep your hard-earned assets out of the hands of their creditors. That may be particularly important if your heir has a problem with unpaid bills or tends to gamble. It can also prevent them from losing their inheritance in a bad divorce.

Spendthrift trusts aren’t right for everyone — but they aren’t your only option. There are numerous kinds of trusts out there that may serve your purposes even better. Talk your concerns over with an experienced attorney to learn more.