Some people are better money managers than others. When you are engaged in your inheritance planning efforts, you may have concerns about the spendthrift tendencies of someone on your inheritance list. If you feel this way, there are steps that you can take to prevent inheritance squandering.
Revocable Living Trusts
If you are concerned about losing control of assets that you convey into a trust, you do not have to worry if you create a revocable living trust. With this type of trust, you can act as the trustee and the beneficiary while you are living, and you have the power of revocation. You can dissolve the trust and take back direct personal possession of the assets at any time, so there is no loss of control on any level.
In the trust declaration you name a successor trustee to administer the trust after you are gone, and you name a successor beneficiary (or multiple beneficiaries). You can name a person that you know personally to act as the trustee, but some people will use a corporate trustee like a trust company or the trust section of a bank.
To protect a spendthrift beneficiary, you could leave behind very specific instructions with regard to the way that you want the assets to be distributed after you are gone. For example, you could allow for distributions of the trust’s earnings on a monthly basis, or you could determine a particular monthly distribution amount.
Many people will give the trustee the discretion to distribute portions of the principal when certain circumstances exist, and larger distributions could be given when the beneficiary reaches a certain age.
These are some possibilities, but you can essentially include any stipulations that you would like to when you are creating a living trust declaration.
The ability to prevent inheritance squandering is just one of the benefits that you gain if you use a revocable living trust as the centerpiece of your estate plan. If you would like to learn more about the value of revocable living trusts, download our special report on the subject.
The report is free, and you can access your copy through this page: Free Report on Revocable Living Trusts.
Irrevocable Spendthrift Trusts
There is another type of trust that is specifically designed to protect a beneficiary with spendthrift tendencies. An irrevocable spendthrift trust can protect assets from the beneficiary’s creditors if you want to add an additional layer of protection.
Of course, as the name would imply, you cannot change your mind and revoke the trust after it has been created.
Take the Next Step
Feel free to contact us through this page at your convenience if you would like to set up a no obligation consultation: Westport CT Estate Planning Lawyers.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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