For some people receiving an inheritance is the only life event that is likely to take place that will provide a significant influx of financial resources. But at the same time, this is going to mean that a parent or grandparent that was always there in a pinch will no longer be around to assist if financial difficulties were to arise.
As you are engaged in your estate planning efforts you may take the above to heart. What if a loved one was to burn through his or her inheritance too quickly?
Indeed, someone who has been living on a tight budget may be tempted to splurge excessively after receiving an inheritance. One little “treat” can lead to another and before you know it this financial underpinning can dwindle down to nothing.
The solution would be to implement some tried-and-true legacy planning strategies. One possibility would be the creation of a spendthrift trust. The beneficiary can receive monetary distributions on an incremental basis or in any way that you choose when you draw up the trust agreement.
However, this individual cannot access the principal and has no decision-making authority with regard to how the funds are invested. Another nice thing about these trusts is that the assets are protected from the beneficiary’s creditors.
Another course of action would be the creation of an incentive trust. With these trusts the beneficiary must meet certain conditions that are contained within the trust agreement before distributions will be made. You can utilize an incentive trusts to allow your beneficiary to realize benefits through positive and responsible actions.
It is important to remember that you ultimately have the power to arrange for asset transfers in a number of different ways. By engaging the appropriate legal expertise it is very likely that you will be able to find the appropriate responses to any and all estate planning challenges.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.