Estate planning professionals often recommend trusts as vehicles for their clients. One particular type of trust might be suggested to those facing tough decisions about their legacy.
While not every estate planner will need this type of trust, spendthrift trusts are quite useful in certain situations. Below are three examples of circumstances where you might want to fund these trusts.
1. A beneficiary has an addiction problem
Giving someone unfettered access to funds when they suffer from an addiction to alcohol, drugs or problem behaviors like gambling is like giving the keys to a high-speed vehicle to someone who cannot drive.
Instead, setting up regular disbursements of the funds and allowing a trustee to hold the reins might be a wiser course of action.
2. Your beneficiary works in high-risk industries
Those who have high-stakes jobs in fields like law or medicine, where they can be subject to litigation, may prefer having their inheritance protected in a spendthrift trust.
3. You have concerns about those close to your beneficiary
Whether it’s a controlling spouse or a motley retinue of “friends” who are more like hangers-on, you can have valid concerns over who wields influence in your loved one’s circle. Designating funds to be disbursed in a spendthrift trust can be the buffer you need to ensure your beneficiary alone receives these monies.
These are not the only circumstances for these trusts
Your family’s circumstances may be similar to the above trio of examples, or you may have additional concerns and questions. Learning more about how spendthrift trusts can protect your loved ones from their worst impulses is prudent when hashing out your estate plan.
