Saving Your Heirs From Themselves

I hope your February is going well. Lots of you have had days off and are enjoying some of the cold weather activities such as hitting the slopes, or sledding all fun stuff! But I do hope you get your plan in place and protect your loved ones from the “what if” Like I said last week, I went and purchased some more gift certificates for Vintage Steak house in San Juan Capistrano, the old vintage pull carts, I only have a couple left so give me a call. Its a wonderful restaurant that would make for a great date night. All you have to do is make your appointment, mention the romantic package and I will have a certificate waiting for you! So I have had a few inquiries this past week about protecting those kids that spend too much money… okay, there are some things you can do. You’ve worked hard for your money… You’ve made some good investments and lived well within your means… You want to leave as much as possible to your heirs but… That grandson has a serious snowboarding addiction… Or maybe your daughter is just crazy about her new husband and the guy hasn’t had a steady job since he mowed yards in eighth grade… You don’t want to disinherit them but how do you save them from themselves and keep them squandering your hard-earned wealth? One option is what’s known as a spendthrift trust.

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What is a Spendthrift Trust? The quick answer is that a spendthrift trust is a trust account overseen by a trustee, typically your banker, that controls the assets you leave behind when you die. The beneficiary of the trust can’t spend the money before they receive distributions from the trust and the trustee has the authority to determine what funds are necessary according to what you’ve stipulated in your trust documents. Protection from Creditors A spendthrift trust may be a really good option to protect your assets from creditors, especially if you know your heirs are less than fiscally responsible. As an example, let’s say you left $10 million to your daughter and the trust account generated $400,000 per year in income that you allowed to be paid to her. She couldn’t use the trust assets as collateral for anything else. If she goes out and buys a $20 million yacht (which she obviously couldn’t afford), the creditors can’t collect the assets of the trust to pay the debt. All they can collect is the $400,000 distribution your daughter receives from the trust. That keeps your assets in place to generate interest for years to come. Important Things to Note While a spendthrift trust protects the trust assets from most creditors, as with most legal issues, there are exceptions. Say, for example, your beneficiary owes child support or alimony. Most jurisdictions will allow access to the trust’s assets in order to pay those obligations. And there are some states with stringent restrictions about the establishment of spendthrift trusts. For example, you can’t set up a spendthrift trust for your own benefit. And your beneficiary can’t be given power to control or dispose of trust property without invalidating the spendthrift provision of the trust itself. Statutes govern the establishment of spendthrift trusts. Always get legal advice before establishing any type of trust but especially in the case of a spendthrift trust to ensure that the requirements of your state are met. We can help you with the establishment of a spendthrift trust or any type of trust you want to provide for your loved ones after you’re gone. Call us to schedule your Family Wealth Planning Session today. Our Family Wealth Planning Session is normally $750, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call today and mention this article and the fact that you are interested in the romance package!!