A discretionary trust can help prevent wasteful spending

On Behalf of | May 31, 2022 | Estate Planning |

One common complaint that people have when making an estate plan is that they’re worried that one of their heirs is going to waste the money. They’ve spent their entire life saving up this inheritance, and they do want to pass it on to their children, but they want those heirs to use the money responsibly. Over the years, they’ve gotten the sense that this specific individual will not do so.

If you’re worried about this, don’t assume that you have to either accept those wasteful spending habits or disinherit the person entirely. There is another option, which is to use a discretionary trust to pass your money on to your heir.

Choosing a trustee

With a discretionary trust, you pick a trustee, and then you fund the trust with your assets. After you pass away, the trustee is the one who is in charge of those funds. They get to make the decisions on when to withdraw money from the fund, for example, or how the money can be used by your heir.

As such, you protect that heir from their own wasteful spending habits. You get to choose a responsible person that you trust to make the right decisions. It is very important to pick the right person, so you want to have long conversations with them in advance about what type of spending you would appreciate. But this does give you a way to financially assist your heir without feeling like they are simply going to spend all of the money that you’ve saved up for so long.

Getting your plan in place

If you’re doing your estate planning and you’d like to use a trust for any reason, make sure you know what steps you need to take.