This article is written with regard to an aspect of estate planning that weighs on many peoples minds. Should you distribute the assets of your trust to your loved ones outright and free of any controls, or is there a reason you will want to distribute assets to your estate beneficiaries over time? Are the beneficiaries of your estate responsible to hand their inheritance? Or are you concerned that after your demise your had earned assets will be spent quickly and thoughtlessly?
Let me tell you why I am posing these questions. Some of our clients have a hard time making the difficult decision to see that their loved ones are protected from themselves. I have seen first hand a beneficiary spend a substantial amount of money on drugs in one year and have nothing left for the remainder of his lifetime. I have also seen a parent set up a “spendthrift” trust so that the child does not have direct access to the inheritance; rather the inheritance is distributed over the child’s lifetime. Whether it is drugs, alcohol, gambling, financial irresponsibility or some other way that money can quickly disappear, there are alternatives on how to distribute the money to an irresponsible beneficiary.
You can set up a trust where a trustee of a trust pays the beneficiary’s expenses for food, clothing, shelter, transportation, phone, and therefore the beneficiary’s needs are met without the beneficiary receiving any money directly. You can set up a trust so that the beneficiary receives a stream of income for their lifetime and the beneficiary pays their own bills. The options are diverse and are developed with an attorney to meet your specific situation. The key to this type of planning is who will be the trustee of the inheritance. It can be a friend or family member. The choice of a friend or family member needs to be considered carefully since friends and family members may not want to continue to be responsible for the beneficiary over a long period of time. If you do not have a friend or family member who you are comfortable handling this duty for you, then you will want to consider a bank, an attorney or a CPA.
Over the years at our law firm we have encountered various family dynamics and we are trained and capable to advise you on such matters. Don’t put your head in the sand. Consider your beneficiaries’ strengths and weaknesses. If you feel someone you care about needs extra protection, feel free to call our office and make an appointment to meet with one of the attorneys to discuss your concern. What do you want your legacy to be?
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