When you have a beneficiary you want to leave money to, who has poor money management skills, you’re left with the choice of letting that beneficiary receive the asset with no strings attached, or you can direct that the beneficiary receive the asset in trust with instructions. Some beneficiaries can only handle certain amounts of money. You need to consider what you’re leaving versus what the person can handle, given their actual productivity and saving skills.
The type of trust that protects those with poor money management skills is the spendthrift provision within a testamentary trust. A testamentary trust can be created through your last will and testament or your living trust. If you’re going to be creating one of these types of spendthrift trusts, you need to pay close attention to the person you named as trustee of this trust. The trustee has money management control and authority over the timing and nature of the distributions to the ultimate beneficiary, whom you have deemed to have poor money management skills. You will probably need to reconsider having the beneficiary also serve as the trustee.
When the beneficiary is not also the trustee, there is a natural adversarial relationship between the trustee and the beneficiary. The beneficiary with poor money management skills may not be happy that he or she cannot receive the whole chunk of money that you’ve left them. You need to think about the instructions that you leave your trustees about when to distribute the assets and how. The trustee would need to have discretionary standards to follow. Their responsibility is to follow your instructions.
Consider the dynamics of the beneficiary having to ask this trustee for money. Will the trustee be annoyed by the constant requests? Is the trustee going to follow your wishes or give in? If you utilize third parties who are unrelated to you, they’re going to follow the language that you leave them. Family members may not listen and may be manipulated by the beneficiary to avoid disrupting their relationship with them. Think carefully when naming your trustee and instructions.
What Trust Should I Use When I Have Heirs With Addiction Issues?
An heir suffering with an addiction is another scenario that calls for use of the spendthrift testamentary trust. You may want to consider restricting the type of payout to small increments, where you’re using a trust like an annuity. The trustee can manage the underlying assets in the trust for the beneficiary and whatever kind of investments the trustee sees fit. The payout instruction you leave the trustee for this addicted beneficiary could just be a straight flat payout. For example, pay out whatever the trust balance is at the end of December 31st or pay out five percent of the total trust balance over the course of the next 12 months.
You can also set up conditions that must be fulfilled in order to receive a distribution from the trust, including proof of seeking treatment. You can direct the terms however you see fit and proper. In many cases, you will find that continuing your judgment on lending money or giving money to children or beneficiaries with addiction issues is possible after your death.
For more information on Trusts For Poor Money Management Skills, an initial consultation is your next best step. Get the information and legal answers you’re seeking by calling [number type=”1″] today.
Author Bio
Kellen Bryant, Esq.
Founder
Florida Bar Board Certified Elder Law Attorney, Kellen Bryant focuses his law practice on advising and helping caregivers with a particular focus on asset protection and preservation from long-term care costs, creditors, and predators. Kellen Bryant is AV Preeminent® Rated, meaning his attorney peers rated him at the highest level of professional excellence. Kellen Bryant was nominated and selected as a Super Lawyer, Rising Star: 2022.
