It’s not always a good idea to leave someone a lump sum of money in your will. The temptation to spend it all at once or fritter it away on luxury items can be too great for some beneficiaries. Others may be prone to losing it to other parties, such as to their spouse in a divorce, a customer in a lawsuit, a creditor in a bankruptcy filing or a casino or drug dealer.
Some people just decide not to leave anything to a loved one when they are unsure that the money will be used wisely. However, that can create its own set of problems, as the family member who is disinherited might feel it’s a sign you did not love them, or that someone else interfered because they wanted the money for themselves.
Giving protection to the money and the beneficiary
A spendthrift trust can help protect the money you leave and the beneficiary. You create the trust with rules regarding when and how the money you put into it will be released. You name a trustee to manage things according to your instructions. You can even give them the freedom to make decisions about when to distribute funds. Obviously, you’d want someone you can trust and rely on for this role — not someone whom the beneficiary could easily persuade to distribute more money.
Spendthrift trusts are not right for every circumstance, but they can be a very effective tool in certain situations. With experienced legal guidance to learn more about the different estate planning options available, you can create an estate plan that suits your situation and objectives and the realities of your heirs and other beneficiaries.
