If you are contemplating your estate plan, one useful vehicle for many New Yorkers is a spendthrift trust. While not every trust grantor will need this type of trust for their beneficiaries, they can be useful for preventing problems after you are gone.
Below is some important information about spendthrift trusts:
Who benefits from spendthrift trusts?
Not all beneficiaries are irresponsible with their financial affairs. But not everyone is equipped to deal with sudden windfalls of significant cash that can be misappropriated by spouses, partners, or even mere acquaintances.
Others may have issues with alcohol or drugs or struggle with problem gambling or shopping addictions. If a trust grantor worries that a beneficiary could blow through their inheritance or — even worse — destroy their lives with the funds, a spendthrift trust can help keep them in check.
How these trusts work
Trust grantors appoint a trustee to manage the fund’s principal while also making predetermined disbursements to the beneficiaries. This prevents the beneficiaries from being able to access and drain the trust principal. That way, your loved ones will still have a reliable source of income as you intended.
One point to consider
A common mistake of many trust grantors is to appoint one family member as trustee over another family member’s funds. This is counterintuitive because it can create a rift in the relationships between the beneficiaries and the trustees.
Appointing a legal or financial professional to oversee your loved one’s trust is a good fiscal move because it helps sustain the ties between family members. Learning more about your estate planning options can provide peace of mind — and you can’t put a price on that.