How can a trust keep assets safe from poor spending habits?

You love your children, but that doesn’t prevent you from seeing their flaws. And if you have a child who makes poor financial decisions, you worry about how he or she will survive when you’re not there to lend a helping hand. Can you protect your child from spending an inheritance too quickly?

A successful estate plan distributes your assets to your family according to your wishes. If you wish to ensure your child spends your inheritance responsibly, you can create a trust that limits how much money he or she receives at once.

Withholding a lump sum

Your estate plan will have many tools that help you manage how your family receives your assets. One tool that enables you to keep your inheritance safe is a spendthrift trust. This type of trust can pay your beneficiary in limited payments, making sure that the person doesn’t receive a lump sum of everything at once.

You decide the distribution rules

When you create your trust, you can work with your attorney to add a spendthrift provision. With this addition, you make rules for how the trust pays out. You may have yearly payments for your child based on the income the trust generates. You can also give a trustee rules for when your child can receive a larger amount.

Whatever way you decide to distribute the assets, the trust keeps them safe from your child’s wanton spending habits.

Communication can help prepare your family

As you build your estate plan, your family may disagree with your choices. You may want to speak with your child when you decide to create a spendthrift trust. Even if he or she has a concern, your child will know what to expect when you pass away.

Keeping your child and your assets safe

Once you’re gone, you won’t be able to rescue your family from poor financial decisions. But by limiting how a trust distributes your assets, you can ensure your child won’t blow through an inheritance.

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Kevin Tharpe

With 25 years of experience, Kevin understands how estate planning, special needs planning, and government benefits programs work together. This is a crucial element of a thorough plan. He explains your eligibility for benefits programs and ensures that you do not make costly mistakes that may disqualify you or deplete your assets.

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