As you contemplate the many options you have for estate planning, one option is often given short shrift — the spendthrift trust. Partly because of its name, this type of trust does not always get the respect it deserves as a viable means of passing wealth down to future generations.
But in truth, spendthrift trusts are good instruments to use to protect heirs who might be financially naive.
Who needs these types of trusts?
Face it — not everyone makes fiscally responsible choices when presented with significant lump sums of money, like sudden inheritances. Some may burn through the cash and have little to nothing to show for it. Others may be susceptible to manipulation by so-called friends or even spouses bent on separating them from their money.
Addiction issues may dictate terms for spendthrift trusts
If you have a potential heir who has struggled mightily to refrain from using drugs or alcohol, having unfettered access to cash could cause them to have a deadly relapse. They could be at risk of overdosing or harming another person while drunk or high. No one wants that fate for their loved one.
The trust principal is protected from lawsuits
Suppose your heir is an attorney, doctor or another professional who could face a malpractice allegation in their career. Without a trust in place to protect the assets from civil seizure after a court judgment goes against them, others could wind up with your hard-earned cash.
But spendthrift trusts protect against all of the above scenarios. Heirs receive incremental disbursements from a trustee you choose according to the terms that you set as the trust grantor. Your Nashville estate planning attorney can help you sort out all the options you have to pass money and assets to your loved ones.