When doing your estate planning, you may come to realize that certain heirs may need more restrictions placed on their future inheritances.
While spendthrift trusts won’t be needed by every estate planner, they can come in handy for heirs who struggle with money management, substance abuse or other issues. Learn more about this estate-planning option below.
Who benefits most?
Trust grantors typically incorporate more restrictions on these trusts to prevent the beneficiaries from accessing and draining the trust’s principal by only receiving pre-scheduled disbursements of the funds from trustees.
Beneficiaries may chafe at the restrictions, but they actually can benefit from proper investment and management of the trust’s principal. Keep in mind that not every heir is financially savvy and able to wisely manage large sums of money.
Choose unrelated third parties as trustees
One way to sow discord into formerly affable relationships is to appoint one family member over the finances of another relative. This can set up a power imbalance that destabilizes the familial ties and erodes the relationship.
It’s far better to preserve the relationship between the parties by choosing an unrelated neutral party to oversee the trust’s management and handle financial disbursements.
What if beneficiaries are upset at the restrictions?
It’s important to understand that, outside of abiding by a few basic rules about inheritance law, people are free to leave their funds to whomever they choose. However, if beneficiaries are upset by the terms of their inheritance, they are always free to refuse it.
