As you mull your options regarding estate planning, one choice worth a second glance could be trust funds. There are multiple options in that genre, but a particularly useful one is a spendthrift trust.
Its name alone might give you pause but reading up on the pros and cons of funding a spendthrift trust can help you make an informed decision.
What are the pros of spendthrift trusts
Below are some of the positive outcomes of funding spendthrift trusts. They protect beneficiaries who may:
- Lack of money management skills
- Be plagued by addictions
- Be married to spouses who are profligate spenders
Their future could also, by virtue of their career choices should they go into something like medicine or law, be particularly vulnerable to malpractice litigation that could see their inheritances paid out in settlements or judgments.
In all of the above situations, a spendthrift trust overseen and managed by a trustee whom you appoint can protect your heir and preserve the legacy you leave them.
Negatives associated with spendthrift trusts
Beneficiaries may view spendthrift trusts as a type of “dead-hand control” you exert from beyond the grave. While their perceptions are their own, you are free to do as you please with any behests you make during your lifetime.
Another potential negative outcome is a deterioration in the relationship between siblings, parent and child or between other relatives who previously enjoyed civil and convivial relationships with one another. Problems arise when one relative is named as trustee over the funds of a sibling or other kin. Resentments are common with these arrangements, but they can easily be avoided. Choose a professional trustee unrelated to any of your heirs who also has no common business interests.
This simple estate planning action goes far to preserve family unity while protecting vulnerable beneficiaries from their own worst impulses and predation by others.