More Than 40 Years Of Legal Service To The Baton Rouge Region
Photo of Professionals at Ezell Law Firm, LLC
Photo of Professionals at Ezell Law Firm, LLC
More Than 40 Years Of Legal Service To The Baton Rouge Region

Consider a spendthrift trust to protect against overspending

On Behalf of | Jun 12, 2020 | Firm News |

Baton Rouge Legal Blog

You want to leave behind assets for your children, but something that you’re concerned about is that your children don’t always have the best habits. One may like to gamble a lot. Another one may tend to donate almost all of her money to others, which leaves them in poor financial circumstances time and time again. They’re young, but they need to know that their actions have consequences that could leave them in dire financial straits.

Your goal is to leave them money that they can’t spend without thinking about the consequences. One thing you might be interested in is the spendthrift trust. A spendthrift trust is fantastic, because it’s designed to protect your children from themselves. You know that getting a sudden inheritance can be a big shock, and you also know that your children may rush to spend what they receive.

What a spendthrift trust can do

With a spendthrift trust, you can add protective clauses that won’t allow your children to spend the money too quickly or without thought. For example, in the spendthrift trust, you may set it up so that your older child is not able to take withdrawals directly. You could set aside that money only for education or specific expenses, like buying a home.

For your child who likes to give away and donate her assets, you could put a limitation on the amount that is paid out each month. Alternatively, you could have the trustee monitor the account and pay out only for specific, approved purchases.

Depending on your children’s ages, it may also make sense to use a spendthrift trust to prevent them from using the money all at once early in life. Younger individuals may not be as cautious with their money, so you may want to consider having a trust that pays out gradually over time or that pays out only upon reaching certain milestones, such as getting married, buying a house or going to school. You can set up an age when the money pays out, too, so if you want your children to live life independently until they’re 30 or 40, you could set up the trust to pay out once they reach that age.

Sometimes, it is necessary to take steps to provide continued guidance, even though you’re no longer alive. With a trust like this, you can set up restrictions and requirements, so that you know that your children will be taken care of despite the fact that you can’t be in control of the funds yourself.

Archives

""