When doing estate planning, it sometimes becomes evident that an heir is incapable of responsibly managing the money and resources you intend to leave them after you have left this world.
Whether it’s a weakness for drink or drugs, a tendency to gamble or overspend when shopping, some future beneficiaries might not do well with unfettered access to their inheritance. Alternatively, they could simply be too young or financially naive to handle managing a large sum of money.
An option to consider
If any of the above are true, funding a spendthrift trust is one possible way to provide for your heirs while still protecting them from mistakes and worst impulses. That way, they can’t access the principal funds but will still receive disbursements from the trustee you appoint to manage the trust. The disbursements can be set up at whatever frequency you prefer.
Choosing a trustee
This is a big decision, so you want to get it right. Appointing a qualified, trustworthy person as trustee over your beneficiary’s funds is vital. Many people turn to their family members for this task, but appointing a relative as trustee over the funds of another relative is generally not the best choice.
While that might seem counterintuitive, consider how the transactional nature of the relationship between beneficiaries and trustees could bleed over into their familial relationships (and even ruin them).
Certainly, the last thing that anyone wants is for their posthumous generosity to create bad blood among loved ones. Appointing a legal or financial professional as trustee can preempt any hurt feelings and avoid family feuds.