It’s a bit of a quandary – you want to leave your assets to your loved ones, but not all of them manage money wisely. You may completely love your granddaughter but cringe at her spendthrift habits. You have worked hard all your life for your money and want to leave it to your heirs. But how do you prevent them from recklessly spending their inheritance?
A trust is different from a will. With a trust, you can retain a certain amount of control over how the inheritance is used. And a spendthrift trust is aimed at preventing the beneficiary from quickly wasting the money you left them.
You must use precise language to create a spendthrift trust or even a clause within the trust. When done correctly, the spendthrift trust will prevent the beneficiary from spending the funds frivolously. It will also prevent borrowing against those funds as well as block their creditors from accessing the trust funds to pay their debts.
Think of it as a unique way to protect your loved ones from themself.
If you leave your granddaughter a piece of land special to the family, this trust can prevent them from selling the property and using the money for an all-expense paid cruise.
One of the ways you can establish a spendthrift trust is to not give the beneficiary money all at once. Instead, leaving them a certain amount over months or years can prevent them from quickly wasting the entire fund. And hopefully, over the months or years, they will become better at managing money.
You can set up a trustee to ensure the beneficiary does not sell or give away what you left them. The trustee can rein in their spending habits and manage the properties.
This differs from an Incentive Trust that pushes the beneficiary to make certain choices.
Working with an experienced estate planning attorney will help you correctly set up your spendthrift trust. The wording will be such that the beneficiaries genuinely benefit from your assets.
If you have questions about a spendthrift trust, please contact us to schedule a free consultation. Call us for a consultation at 630-864-5835 to learn how an estate planning lawyer could help you.
Areas we serve: Cook, DuPage, Kane, Lake and Will counties.