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How to determine whether a spendthrift trust is needed

On Behalf of | Dec 8, 2021 | Trusts

When it comes time to devise your estate plan, everything may not be cut and dried. You may have some potential beneficiaries you do not want to have unfettered access to the funds. You fear that they might spend excessively, use their legacy to drink or drug their life away or even have the funds diminished by a spouse’s influence.

In those and other related circumstances, one estate planning option to consider is funding a spendthrift trust. Below are some important things to know about these types of trusts.

How are spendthrift trusts structured?

When you set up a spendthrift trust, you appoint one or more trustees to oversee the management of the trust and make scheduled disbursements to your beneficiary. The key here is that the beneficiary does not have access to the trust’s principal.

Why does that matter?

Having the funds controlled by a trustee assures that an irresponsible heir cannot deplete the principal via wild spending sprees or drug and alcohol binges. It is also a way to deny access to a grasping spouse with their own agenda. Last, and often most importantly, it protects the trust principal from being paid out to creditors or plaintiffs in a lawsuit.

Who should be the trustee?

Many trust grantors choose unrelated third parties who have no connection to the heirs. Choosing a relative of the other beneficiary can forever alter their relationship and cause problems where none previously existed.

Where to turn for trust-planning information?

Trusts are complex financial instruments. A financial or legal professional in the Oak Hill area can offer guidance about funding the appropriate trust to meet the needs of your family.