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How you can restrict estate access to ensure longevity

On Behalf of | Mar 1, 2023 | Estate Planning |

You’ve worked hard to accumulate your wealth and set your loved ones up for success. As a result, you may want to ensure that you create an estate plan that effectively protects that wealth and provides long-term stability to those who intend to inherit from you.

There are several ways to do this. As we’ve discussed previously on the blog, you have a lot of trust options that you can utilize to create the estate plan that’s right for you.

But if you worry about how one of your heirs will spend their inheritance, you might want to take a more restrictive approach in your estate plan. This may include the use of a spendthrift trust.

What is a spendthrift trust?

In a spendthrift trust, the beneficiary does not control the trust’s assets until they are released to them. Instead, the trustee releases assets to the named beneficiary in accordance with the provisions that you’ve created.

For instance, you might require the beneficiary to graduate from college or reach another benchmark before they can collect assets.

This not only protects your assets from quick depletion, but it also protects them from the reach of your heir’s creditors, as they can’t gain access to the trust’s assets until they are released to the beneficiary.

What about a discretionary trust?

A discretionary trust is another option you have when trying to restrict your beneficiary’s access to large portions of your estate. Here, trust assets remain owned by the trust and are only transferred to the beneficiary as the trustee sees fit.

In other words, whereas you control the release of assets in a spendthrift trust through spendthrift provisions, the trustee overseeing a discretionary trust has the power to determine when trust assets should be released.

What other options do you have?

If you’re unsure about using a spendthrift or discretionary trust, then you might want to consider some of your other estate planning options.

Another avenue you can take is using a remainder trust. Here, you leave assets to an initial beneficiary, specifying that anything that is left over after that beneficiary passes away is to be inherited by a second beneficiary. This can restrict the second beneficiary’s access to trust assets for a significant time, ensuring some longevity for your assets.

An incentive trust may be another good option for you. Since you can place conditions on the release of these trust assets, you can specify that your loved one is to hold a job for a specific period or complete a financial literacy course before assets will be released to them. This can give you some peace of mind knowing that your heir has some additional income and that they have the skills and knowledge necessary to appropriately manage their inheritance.

Do you want to learn more about your estate planning options?

There’s a lot to take into account when you’re engaging in the estate planning process. And you have to be diligent in choosing your legal vehicles if you want to ensure that you’re protecting your assets and your loved ones as fully as possible.



Photo of Jennifer D. Sharpe