While a will is the most basic and common component of any estate plan, it does have several flaws. For example, a will might be contested for several reasons, such as the discovery of duplicate wills or the suspicion of undue influence. And, beneficiaries often have to wait several months to over a year for probate (a very public process) to end before they see any assets, at which point the estate may also be taxed.
Alternatively, testators can include trusts in their estate plans. A trust is a legal document that allows a grantor to place assets in the possession of trustees. When the time comes, the trustee is responsible for distributing assets. Trusts also have the added benefit of a higher degree of privacy.
There are many kinds of trusts with unique wording, such as pet trusts, charitable trusts, and generation-skipping trusts. If you are a potential trust grantor who worries your beneficiary will struggle to manage their finances and maintain their wealth, you may benefit from establishing a spendthrift trust. Here’s what you should know:
How to make sure a beneficiary spends your assets wisely
Some beneficiaries can not be trusted to spend their inheritance wisely. They might, for instance, be too young to understand how to manage a high-asset trust, or they might wrestle with addiction addition. Others may have a history of gambling; or making unwise investments.
Whatever the cause of their poor money management, you can create a spendthrift trust to limit how your beneficiary uses their inheritance. For example, while many trusts allow beneficiaries to receive their inheritance in one distribution, a spendthrift trust provides for the release of assets over time and in measured amounts. This can help, in theory, to prevent a beneficiary from quickly burning through their inheritance.
Having the right type of trust can greatly benefit your family members. Not sure which type is right for you? Reach out for legal help at Sjoberg & Tebelius, P.A.