Part of estate planning involves positioning and optimizing your assets in a manner that provides asset transference to your loved ones with minimal asset erosion. When you’re in the earlier stages of your long-term planning this will feel a lot like the financial planning that you have done throughout your life; important, but not necessarily an emotional exercise. But as you get older and your twilight years beckon, the reality of your impending absence can hit home and the true purpose of your legacy can take on an added layer of meaning.
Since their bequests will be in essence the final act of assistance that you extend toward your loved ones, you may want to take the strengths and weaknesses of each of your heirs into consideration. Those who are older and more established, having demonstrated an ability to handle their own personal finances effectively pose no challenges. You simply decide what you would like to give to them and you can do so in a straightforward and direct manner without much hesitation. But not every person in the family is always going to be the best handler of money. Ironically, these are the people that are probably going to need assistance most of all.
This leads to a challenging situation that is often addressed through the creation of spendthrift trusts. With these vehicles the beneficiary does not have direct access to the funds, and creditors or claimants cannot target trust assets. The trustee facilitates distributions to the beneficiary in accordance with the stipulations that you set forth in the trust agreement. Many people will provide income for the beneficiary that is derived from the earnings of the trust while keeping the principal intact for a set period of time.
Spendthrift trusts can be the perfect solution when you want to provide for a loved one on a long-term basis while taking all financial decision making out of his or her hands.
Latest posts by Alan Augulis, Estate Planning Attorney (see all)
- Trust Administration 101 for the First-Time Trustee - August 23, 2018
- Do I Need a Medicaid Planning Attorney? - June 11, 2018
- Can an Incapacity Planning Attorney Help Me Plan for the Possibility of Alzheimer’s? - May 1, 2018