It isn’t uncommon for individuals in Pennsylvania and throughout America to have trouble managing a large financial windfall. This can be true whether a person gets a significant raise at work or inherits a large sum of money from a parent or grandparent. However, there are ways that individuals can help to protect beneficiaries from mismanaging money that is passed down to them. First, it can be a good idea for parents or grandparents to have a financial talk with their children or grandchildren.
Having this talk can get younger family members thinking about ways to be responsible with their money. Of course, a conversation alone won’t protect a person from the perils of spending money in a frivolous manner. Adding a spendthrift provision to a trust could make it harder for a beneficiary to waste his or her money. This provision gives a trustee the ability to determine when money is distributed and what it can be used for.
It is possible to include mandatory distributions in addition to those authorized by a trustee. The terms of a spendthrift trust can remain in place for a certain number of years or until the beneficiary passes away. In addition to protecting a person from his or her poor spending habits, keeping money or other assets in a trust will provide protection from creditor claims.
Adding a trust to an estate plan may be an effective way to protect assets from creditors and the spending habits of a beneficiary. As part of the estate planning process, it is a good idea to review a trust or other plan documents on a regular basis. This may give a person an opportunity to review beneficiary designations and otherwise ensure that a plan does what it needs to.
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