It can be challenging to figure out the best way to leave your assets to your loved ones. While a basic will can get the job done, it may be insufficient to get the job done right. This can be especially true when you’re worried about the possibility of your heirs wasting away their inheritance. You want to financially support them, but you also don’t want your hard-earned wealth to disappear in short order. Fortunately, there’s an estate planning tool that can help you in these circumstances.
What to know about a spendthrift trust
A spendthrift trust focuses on incrementally releasing trust assets so that the bulk of an inheritance can’t be quickly spent away. This can shield your estate assets from poor spending habits and financial mismanagement. For example, if you place $100,000 in a trust, then you can specify that only dividends paid by the trust’s investments will be released to the beneficiary on a quarterly basis. You can be creative here and draft the terms to suit your wishes.
Additionally, assets that remain within the trust are protected from the beneficiary’s creditors. Therefore, if your heir ends up deep in debt, creditors won’t be able to reach assets that remain in the trust to satisfy those debts. This can help ensure longevity of your estate and provide your loved one with long-term, consistent benefits from the trust. It’s also worth noting that a spendthrift trust bypasses the probate process, which can save your estate time and money.
Is a spendthrift trust right for your estate plan?
Ultimately, that’s a question that only you can answer. However, it’s a good option if you’re concerned about how your loved ones will spend their inheritance. But there are other estate planning tools that you can utilize to address that and other estate planning issues.