Three ways to protect an inheritance from being squandered

On Behalf of | Jan 12, 2024 | Estate Planning |

It’s taken you decades to build up your wealth. One of the great things about having accumulated these resources is securing the ability to give them to your loved ones as you see fit. Yet, if you’re like a lot of people who engage in estate planning, you’re worried about how your assets are going to be used by those who inherit them. After all, you don’t want your legacy to be foolishly squandered away.

Fortunately, there are estate planning strategies that can help you control the release of your assets without cutting loved ones out of your inheritance scheme. It’s going to take adept planning on your part, but we hope this post will at least give you a starting point for thinking about how you can effectively navigate your estate plan.

How can you protect your estate’s assets from misuse?

Your estate plan can be customized to fit your needs and your vision of the future. Therefore, if you want to protect your assets from being wasted, then you might want to implement these estate planning vehicles:

  • Spendthrift trust: This type of trust is aimed at restricting a named beneficiary’s access to assets so that they’re not quickly spent away. Therefore, assets from the trust are incrementally released to the beneficiary pursuant to how your trust is laid out. This type of trust also allows you to protect your estate assets from the named beneficiary’s creditors while the assets remain shielded within the trust.
  • Discretionary trust: Similar to a spendthrift trust, assets in a discretionary trust are slowly released over time. The big difference here is that the trustee overseeing a discretionary trust controls when assets are released and in what amount they’re released. So, if you’re going to use this option, you’ll want to make sure you trust the individual who is appointed to manage the trust’s assets.
  • Incentive trust: With this trust type, you lay out conditions that must be met before assets will be released to a named beneficiary. For example, if you have concerns about your loved one’s spending and saving habits, then you might want to require them to compete a financial literacy course before getting their hands on the trust’s assets. But you can lay out other conditions, too, such as marriage, securing and maintaining a full-time job, or completing some sort of treatment. You can get creative here to ensure that you protect the longevity of your estate’s assets.

There may be other estate planning options out there that will help you ensure that your loved ones don’t blow their inheritance. But the key to successfully protecting your assets is thorough planning. If you don’t put in the time needed to think through your estate plan, then you could end up with a plan that leaves your assets susceptible to waste and your loved one’s financial future unstable.

Do you want to know more about creating the estate plan that’s right for you?

There are an unlimited number of ways to approach your estate plan. While that can seem overwhelming, you should view it as an advantage. After all, it means that you can customize your estate plan so that you’re best positioned to bring your vision of the future into reality.