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My heirs are bad with money: What should I do?

On Behalf of | Jan 7, 2019 | Uncategorized

If you have worked your entire life to amass a considerable estate, you are, no doubt, proud of the legacy that you will leave behind to your loved ones. But what if your loved ones are horrible at managing money. As much as you adore them, their gifts and skills do not fall within the realm of asset management. You don’t judge them for this, but you want to protect them from themselves. What should you do?

First and foremost, remember that you are not alone. Many estate planners have faced the same situation, and this is why we have the tradition of the “spendthrift” trust. A spendthrift trust will create sufficient controls to prevent your fiscally irresponsible heirs from losing all of your money as soon as it gets into their hands.

This trust involves three essential parties:

The grantor: This is the individual who creates the trust and funds the trust.

The trustee: This is the selected individual who will manage the trust assets and disburse them in accordance with the terms of the document. It could be a trustworthy family friend, but it might be better to make this person an attorney, accountant, banker or financial advisor.

The beneficiary: This is the “spendthrift” — i.e., the person who will benefit from the trust and receive monetary disbursements over time.

A spendthrift trust is a flexible estate planning tool. You can transfer ownership of specific assets to the trust, which your named trustee will manage in accordance with the instructions contained in the trust. The trustee will make investment decisions in a way that benefits the beneficiaries and honors the terms of the trust. At the same time, the trustee will distribute the trust assets to the beneficiaries according to your careful plans.

Often, the creators of a spendthrift trust will distribute trust assets to the beneficiary over time. Perhaps the trust will dispense a small amount each month to provide an income for your beneficiary. Perhaps, once your beneficiary reaches a certain age — like the age of 30 or 35 — he or she can receive the sum total of the trust assets.

Since your spendthrift trust is a flexible document, you can structure it in virtually any way you like. Therefore, you’ll want to learn about the various ways that Illinois estate planners like to set up these kinds of trusts before deciding on which is best for your family.

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