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Should you fund a spendthrift trust for your heir(s)?

On Behalf of | Mar 8, 2024 | Estate Planning

One conundrum of estate planning some Georgia residents face is how to protect certain heirs from blowing through their inheritances and winding up broke or in other dire straits.

The fact is that some individuals just are poor money managers. Maybe they never learned how to budget or invest and tend to overextend themselves financially with credit card companies and loans. Read on to learn one way to protect your heirs financially after you are gone.

Why a spendthrift trust could solve your problem

These types of trusts are overseen by trustees and the beneficiaries do not have access to the trust’s principal. The trustee of a spendthrift trust invests and manages the funds and disburses predetermined amounts to beneficiaries on a schedule set by the trust grantor (you) or at the discretion of the trustees.

This prevents frivolous spending by the beneficiaries, some of whom might be tempted to gamble it away or buy liquor or drugs and put them at risk. The funds are also protected from creditors (in most cases), spousal access and those seeking judgments against the heirs in the Georgia civil courts.

Choose your trustee responsibly

Put a great deal of thought into whom you choose as trustee over a spendthrift trust. While choosing the relative of a beneficiary might initially seem like a solid solution, choosing them can alter the relationship between the beneficiary and the trustee. Rather than setting up an imbalance of power in the relationship dynamic, you can choose a financial or estate planning professional to take on the task, thus preserving any familial relationships.