estate planning

How to Provide for a Fiscally Irresponsible Heir or Beneficiary

When considering where your hard-earned money will go after you die, it’s normal to take into consideration the types of people who will be receiving the inheritance at hand. The reality is, many people want to pass their inheritance down to someone they love, but who is also irresponsible with money.

You may worry your inheritance will be wasted by the inheritor. However, there are ways to put legal stipulations in place that allow you to safely leave money to an irresponsible heir.

How to Keep an Inheritance Safe with an Irresponsible Heir

This is such a common issue, there is a specific trust designed for this situation. It is called a spendthrift trust, and it allows you to name a fiscally irresponsible heir as a beneficiary while having the safety blanket of choosing a more responsible recipient as the trustee.

When creating a spendthrift trust, you transfer the assets you want to go to the irresponsible heir into a trust. You name a trustee to manage these assets. The appointed trustee will have the ability to manage the wealth in a way that is sensible and beneficial for the irresponsible beneficiary.

You can name specific guidelines for the trustee within the trust around how money should be given to the fiscally irresponsible heir. This will look different for every unique situation. You can outline funds to be deposited to the heir at certain increments of time, like an allowance. Or you can name specific milestones or timelines in which larger portions of the inheritance will be given to the heir.

In this scenario, the irresponsible heir never has complete access or agency over the funds in the trust. This way, the trust money can never be taken away in the event the heir goes bankrupt, or creditors are looking to gain collateral against the irresponsible heir. It also prevents the heir from spending all the money at once and having nothing to show for it.

Final Thoughts

It can be nerve-wracking to leave behind a large sum of money to someone who has proved to be finically irresponsible. It is not selfish to want to protect the assets you leave behind. For this reason, spendthrift trusts are largely recognized as the responsible option for those who want to leave behind an inheritance to an irresponsible heir. Make sure to contact Gandhi Selim Law to help you with your needs.

Published by
Gandhi Selim Law

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