You want to leave your heirs something when you pass away, but you're concerned that your heirs might spend the money or use the assets in a way that isn't wise. How can you protect your assets and beneficiaries?
What can you do to make sure your heirs don't spend more than they should at one time? The answer is a spendthrift trust. A spendthrift trust is an account overseen by at least one trustee. This person controls the assets you leave behind, and the beneficiaries, as a result, cannot spend money without an actual distribution. The trustee has the authority to make distributions in accordance with the agreement you put in place.
For example, you might limit your heirs to receiving $50,000 per year out of a $600,000 trust. This limit could prevent your heirs from overspending or rapidly depleting the funds.
How do you create a spendthrift trust?
A spendthrift trust is one that you establish in the same manner as any other trust. The only difference is that your attorney needs to include a spendthrift provision in the legal documents. Your attorney can help you create a spendthrift trust that can help allocate funds if and when necessary for your heirs.
A spendthrift account gives you peace of mind knowing that your heirs won't go through the assets you provide them without considering what they could lose. With some restrictions, you can help them make the inheritances they receive last longer, so they can enjoy a better life for a longer period of time in the future.
Source: The Balance, "How a Spendthrift Trust Can Protect Your Heirs From Themselves," Joshua Kennon, accessed May 18, 2018