There are many different trusts you can use as you create your estate plan. For instance, you could set up an educational trust if you want to make sure that you cover an heir’s college education costs. You could also consider a spendthrift trust.
With a trust like this, you’ll choose a trustee who can approve of distributions. You will not need to give them any specific directions. For example, you won’t tell the trustee that they can only distribute trust assets for educational purposes, as you would in an educational trust. They can approve payouts to your heir for any reason that they think is valid, and use their discretion to determine if a particular payout is an approach that you would have approved of.
Your heir’s spending habits
The point of this approach is commonly to keep an heir from wasting their inheritance if a trust creator is worried about their spending habits. As some experts put it, the goal is to “protect your assets from a potentially unreliable beneficiary” and to “safeguard your estate.”
For example, maybe you have an heir who perpetually makes poor financial decisions. They are constantly swamped in credit card debt. Maybe they’re even engaged in certain habits that you don’t approve of, like spending their money on sports gambling or alcohol consumption. You don’t want to leave your money directly to them because you think it would all be wasted very quickly.
By placing a trustee in between your heir and the fund itself, you can better ensure that the money is only going to be used for things that you would’ve supported – starting a business, buying a home, going to college, paying medical bills, etc. By using a spendthrift trust, you won’t have to disinherit anyone to feel confident that what you’re leaving behind will be used well.
This is just one example of how a trust can be used in your estate plan. By seeking legal guidance, you can benefit from personalized feedback that will help you to achieve estate planning goals that are specific to your values and needs.