When doing their estate planning, some New Jersey residents may have concerns about how their loved ones will manage and use any funds they leave them in their wills. There could be concerns about how access to large sums of money could upset the balance in their lives.
It’s a fact that some people are unable to adjust to having sudden wealth dropped into their laps (or bank accounts). So, what options do you have?
A spendthrift trust is an effective tool
If you have never heard of a spendthrift trust, the following information may be valuable at estate-planning time. They act just like regular trusts but with some additional protections built into the structure.
For instance, you will need to appoint a trustee over the funds and set up a disbursement schedule for the funds to be released to your beneficiary. They will never have access to the principal, and often more importantly, neither will their spouses or other bad actors.
Creditors can’t drain the trust, either
Another benefit is that if your loved ones ever get heavily into debt, the trust principal remains untouchable as a resource to clear their debts. However, debtors could still potentially be able to seek a percentage of the disbursements until the debts have been paid.
Who might need a trust like this?
Anyone who has ever struggled with substance abuse, gambling problems or shopping addictions may be better off receiving structured payouts that allow them to live comfortably but not run through the money in a short time.
You also might want to fund a spendthrift trust for any heirs whose professions could lead to litigation against them, like attorneys, doctors and other health care workers.
Spendthrift trusts give peace of mind
You’ve always taken care of your family in life, and now you can also provide for them when you have passed. Spendthrift trusts can assure that your family is sustained for years to come.