Many people work hard to build up their wealth and they want their money and investments to go to the right people after they pass away. This wealth could be used for generations in good hands. If a beneficiary misuses their inheritance, however, all that work goes down the drain.
After a testator passes away, they won’t know how their assets are managed. A beneficiary who struggles to manage money, especially a younger beneficiary or someone with a history of addiction may end up irresponsibly using their inheritance. This isn’t exactly what many testators have in mind when they set aside assets for future generations.
Fortunately, testators have many estate planning tools at their disposal. One of these is called a trust. Here’s what you should know:
The benefits of a spendthrift trust
A trust is a legal document that allows a grantor to give assets to a trustee. The trustee is then responsible for holding on to the assets and distributing them when the appropriate time comes. Then, the beneficiary can benefit from the assets placed in a trust. In many ways, a trust is more beneficial than a will. Trusts can circumvent probate, estate taxes and disputes.
Grantors can also make a spendthrift trust that has specific wording so that a beneficiary doesn’t spend all of their inheritance at once. The beneficiary of a spendthrift trust can gain regulatory disbursements, which can give them a financial cushion while protecting the principle of the trust.
A spendthrift trust is just one option. People may need to learn about their legal options before committing to an estate planning tool.