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Friday, August 26, 2016
Protecting Your Loved Ones Through Estate Planning
Summary: Adding extra trust provision to your estate plan can, in some cases, offer a needed level of added protection to your loved ones to whom you desire to leave your wealth. Whether your loved one has addiction issues, is going through divorce, or is merely young and/or naïve, adding spendthrift provisions to your plan can help ensure that your plan works as you want by ensuring that your wealth ends up with your loved ones, not your loved ones’ creditors.
When you set out to make an estate plan and to leave your wealth to your loved ones, you’ll probably spend a great deal mulling over the distribution of your wealth, as it is an important part of your legacy. However, while you may wish to leave a significant sum to a loved one (or group of loved ones,) the prospect of doing so may make you uneasy if you fear that your loved one is ill-equipped to handle a significant influx of wealth. Fear not, though, as there is a wide array of estate planning options for every set of goals, and proper planning can help you protect your loved ones from the possible pitfalls that might otherwise occur with the receipt of a lump sum of wealth.
One estate planning tool is the “spendthrift trust.” A spendthrift trust put limits on the extent to which the beneficiary (or beneficiaries) can access and control the wealth contained in the trust. While the Merriam-Webster defines the word “spendthrift” as a person “who spends money in a careless or wasteful way,” spendthrift trusts can be useful in more situations than just those that involve a potential beneficiary who is notoriously irresponsible with wealth.
To be sure, this tool can help if you have a loved one who is bad at handling wealth, whether that’s due to personal problems like addictions or because he/she easily duped or defrauded. In the case of a spendthrift beneficiary, the trustee you name can continue to protect your goals after you’re gone, making sure that your loved one will only have the benefit of your wealth to benefit him/her in the ways you’d want.
However, a spendthrift trust can also help in other circumstances. Perhaps your loved ones are not irresponsible with money necessarily, but are merely young. While a 19 or 20-year-old is a legal adult, you may feel that your loved one in their late teens or twenties is too young to handle receiving a single, large lump-sum of money. Your estate plan can help protect that loved one by delaying the distribution of wealth to them. It can make payments over time, like every year for a pre-set period of years, at certain major birthdays, like 21, 25 or 30, or other life-event milestones, like college graduation or getting married.
Another situation where extra planning can help is if your loved one has elevated risk when it comes to creditors or potential creditors. Maybe your loved one owns a sole-proprietorship business. Perhaps your loved one is heading toward divorce. If your loved one has creditors or people who could become creditors, a spendthrift trust could provide a much-needed additional degree of protection because, if your beneficiary is not in control of the funds in the trust, those funds are not available to his/her creditors, either.
This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com.
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