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Trusts for Beneficiaries with Financial Issues

Trusts for beneficiaries with financial issues

Summary: Trusts are a common way of addressing the problem of needy beneficiaries — those who are unable to manage their own finances.

Trusts are one of the most widely known estate planning tools. The basic process of creating a trust is relatively straightforward: a person (grantor) signs the appropriate documents placing personal property into a trust and assigning a trustee to hold that property on behalf of the beneficiaries. The grantor can include specific instructions as to who receives the property, when, how much, under what conditions, etc. The trustee is often given great discretion over the distribution of the trust property or assets.

In addition to being an effective estate planning tool, trusts are also a common way of addressing the problem of needy beneficiaries. A “needy beneficiary” is a person who, in the trustee’s discretion, is unable to manage finances in his or her own best interest. They really should have someone else to help manage their funds. Examples of needy beneficiaries include someone with a drug or alcohol problem, someone in the middle of a divorce, a person facing significant debt, or perhaps an individual who just has very bad judgment when it comes to money. The definition is very broad.

In situations with needy beneficiaries, the trustee can make payments on behalf of the beneficiary in question, rather than giving the money or property directly to the person. This could include paying the beneficiary’s rent directly to the landlord, instead of giving the funds to the beneficiary. Or, the trustee could distribute tuition funds directly to a college, rather than giving the money to a teenage beneficiary.

Trusts can be an excellent estate planning tool because of this built-in flexibility. It also reminds us how important it is to appoint a person of trust and sound judgment as their trustee. Trustees help preserve our assets and ensure that our property will not be wasted. For more on this topic, you can watch our videos on spendthrift trusts and asset protection trusts. If you have more questions about trusts, or, if you are interested in an estate planning consultation, contact Siedentopf Law at (404) 736-6066 or via our online form.

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