Some people in California who are creating an estate plan might want to consider using a spendthrift trust. This is a type of trust that can help protect a beneficiary’s inheritance if the person is likely to be irresponsible with their money or might be taken advantage of by others.
Uses of a spendthrift trust
Including a spendthrift trust in an estate plan does not necessarily mean that you do not trust your heirs to use their money wisely. You may simply be concerned that they are not mature enough to manage it and want to ensure that they do not start getting payments until they are older. You could also tie distributions to specific accomplishments, such as getting an advanced degree or reaching a career milestone. Spendthrift trusts may also be used to help protect assets from creditors.
How trustees can help
Another useful element of a spendthrift trust is that it allows you to put someone in charge of when distributions occur as an option to setting specific parameters yourself. This can add another layer of protection when you are able to appoint someone whose judgment you trust when it comes to making distributions to your heirs. It is important to select someone who will not be hampered by dysfunctional family dynamics. For example, choosing one sibling to decide when other siblings receive money can create difficulties.
It is important to fully understand your estate planning options in order to make the best decisions for your loved ones. Trusts can offer some additional advantages over wills, such as greater privacy. Whether a spendthrift trust or another type of trust is right for you will depend on a number of factors, including the size of your estate, the legacy you hope to leave and to whom you are leaving your assets.