Your concerns regarding your adult children’s inability to handle money and poor spending habits have gone on for years. It has become a major point of contention as you create your estate plan. You want to protect those assets you leave for your children, but do you really want those assets in the hands of beneficiaries who will allow it to swiftly slip through their fingers?
In such a situation, it may be wise to consider creating a trust that includes a spendthrift clause. This effective tool protects assets within the trust from beneficiaries’ creditors, but, more significantly, it also protects the assets from the beneficiaries themselves. A spendthrift clause can prevent them from wasting their inheritance.
Prevents beneficiaries from foolish spending
It is natural for a parent to want their adult children to keep their share of your estate secure. A spendthrift clause in your trust provides security similar to a triple-locked door, preventing financial ne’er-do-wells from dipping into the trust to repay debts or spend foolishly. The trustee that you have chosen will follow the terms of your trust when it comes to distributing assets.
Instructions may include strict orders to halt distributions to a beneficiary addicted to gambling or drugs – expensive habits that can lead to a financial downward spiral.
Out of reach of creditors
A spendthrift provision can keep assets out of reach of creditors and may provide protection from a beneficiary’s divorce, bankruptcies, and lawsuits.
A safeguard measure
Protecting the assets of your estate is a priority. A trust that includes a spendthrift clause can keep assets at bay from creditors as well as safeguard them from the irresponsible spending behaviors of your adult children. It is likely that some beneficiaries may grumble about this situation, but, eventually, they will understand why a spendthrift clause was necessary.