When it comes to estate planning, no one knows your heirs and beneficiaries better than you do. You know that while some children or grandchildren may have other positive qualities, good fiscal management has never been one of them.
In some cases, there may be addiction problems or issues with the control a spouse exerts over the family’s purse strings. One way to ensure that your heirs have a financial cushion after you are gone is to fund a spendthrift trust.
There are downsides to spendthrift trusts
It’s your money and you have the right to do with it as you see fit. But that doesn’t mean that all your heirs will necessarily be happy with your decisions. Spendthrift trusts restrict the beneficiaries’ access to the trust’s principal. Some potential heirs can resent these restrictions as a type of control from beyond the grave.
Regardless, you are making the estate-planning choices that you are because you want the best possible outcomes for your beneficiaries. There are ways of structuring the trust and addressing the matter during your lifetime to lessen the likelihood of strained relationships.
Choose professional trustees
Not all beneficiaries require the structure of spendthrift trusts regarding their inheritances. But it is almost universally a mistake to name one beneficiary as a trustee of another beneficiary’s funds in a spendthrift trust.
While it might seem like a good idea to name a responsible heir to oversee the management of the sibling’s (or child’s, parent’s, etc.) spendthrift trust, these kinds of transactional associations can destroy formerly loving and cordial relationships. Your estate planning adviser can help you make the best financial decisions for your own unique circumstances.