If you are drawing up your estate plan, one tool in your toolshed of options could be a trust. Specifically, a spendthrift trust for some of your heirs and beneficiaries.
Why might you want to fund a spendthrift trust? Below are three main reasons why trust grantors choose these types of trusts.
1. A beneficiary who is not good with money
Not everyone is blessed with innate skills that allow them to manage a substantial sum of money. Some beneficiaries might do better with a responsible trustee to manage the principal, thus generating disbursements on a preset schedule determined by the trust grantor (you).
2. An heir is a professional in an industry prone to litigation
If your adult child or grandchild is a health care professional, an attorney or someone else who works in a field where they could be successfully sued. The trust principal will be protected against any judgments against these heirs.
3. Your beneficiary married a domineering spouse
While inheritances are the property of the person who receives the bequest, any commingling of the funds in a shared bank account can quickly turn the funds into community property. A spouse can also bully your beneficiary into accessing the funds for them to fritter away. Spendthrift trusts are a line of defense against just such actions.
Is a spendthrift trust right for your estate plan?
Not every Washington estate planner will need to fund a spendthrift trust as part of their comprehensive estate plan. But for those who may, this is a good option to explore with your financial and legal advisers.
Acting now can provide peace of mind for you and protection for your loved ones.