You love your family members equally, but you have no illusions about some of their weaknesses. Some may be in the grips of a substance abuse disorder or married to partners who have absolute control of the marital finances.
Others may just be bad at managing their money. It’s a skill that can be learned, but not all innately grasp how to budget and live within their means.
Will a large inheritance prove their undoing?
It doesn’t have to (although it could). Fortunately, you can fund a spendthrift trust as part of your estate planning process.
How does such a trust work?
Spendthrift trusts are tools to be used when the trust grantor (you) doesn’t want to leave a beneficiary with unfettered access to the principal of the trust. The terms of the trust are completely within your control during your lifetime. When you pass away, a trustee whom you appoint will manage the trust according to your instructions.
Who will be the trustee?
It’s generally not a good idea to name a sibling, parent or other relative as trustee over the funds of another. These arrangements may foment bad blood between relatives who formerly enjoyed congenial relationships with each other. You don’t want to leave that as part of your legacy.
Attorneys and financial advisers can serve as trustees. They act with professionalism and follow your instructions to the letter.
Spendthrift trusts are not for everybody
Many beneficiaries have no need for spendthrift trusts because they have sufficient income to get by and will not bleed the trust dry. Since they can be perceived as a form of “dead-hand control” by you from beyond the grave, you should never feel compelled to fund a spendthrift trust for all because you needed to do so for one or more beneficiaries.
Because each state has its own laws, it is important to be aware of those regarding trusts here in Washington when you commence your estate planning.