Trusts Prevent Reckless Spending
Have you ever given thought about how your heirs will manage their inheritance when you’re gone?
How many times have we heard parents say of their children, “we don’t have to worry about this child but the other child is a spender?
Having a conversation with your children about money, your wishes for them when you’re gone, and your estate planning should help heirs make better monetary decisions. Still, there is no guarantee that “this” child won’t spend through his or her inheritance faster than “the other” child (especially if he or she isn’t used to having large sums of money).
Years ago, a member of our staff and his wife put their names in for tickets to appear on a Television game show. Like most people they pondered ‘what if?’ What would they do with the money if they won?
After careful consideration they agreed the winnings would go into their savings.
As fate had it, the staffer’s wife won a “cash prize” in the thousands. Instead of putting all or most of the money in savings as planned, they vacationed in Hawaii.
Most people who come into large sums of money tend to spend much of it regardless of whether the money came from winning a game show, a tax return, or inheritance.
Savvy estate planners appreciate that the trust agreement is the key legal document for people concerned about their heirs or beneficiaries spending recklessly, or making poor investment decisions.
Trusts have the potential to protect your heir’s inheritance by controlling what distributions are made, and if necessary, delaying the distributions over a number of years.
In addition, trust agreements reduce estate tax liability for beneficiaries and help them avoid probate. Meaning, it is a great handy dandy legal tool, even if you aren’t worried about your heirs spending recklessly.
For more information about wills, trusts or other estate planning documents, please contact a qualified estate planning attorney.
