If you want to set up an estate plan, it is important to review the different options you have. You could decide that a will suits your needs most effectively, or you could decide to set up a trust. There are many different types of trusts, and it is essential to weigh the advantages and potential drawbacks associated with each option.
For example, setting up a spendthrift trust could be an ideal way to pass assets on to a beneficiary, depending on their circumstances and unique challenges they could face.
Gambling, addiction and spendthrift trusts
According to the California Department of Tax and Fee Administration, spendthrift trusts can allow beneficiaries to receive assets while simultaneously protecting beneficiaries from misusing all of the funds at once due to poor money management. If you have a loved one who struggles with gambling, drug addiction, alcoholism or the inability to manage money, a spendthrift trust could allow you to pass down assets to them without worrying about them misusing all of the funds right away.
Other perks associated with spendthrift trusts
In addition, spendthrift trusts can protect the assets in a trust from creditors, since beneficiaries do not receive the entire amount at once. These trusts can also help protect assets in the event that a beneficiary files for bankruptcy or finds themselves involved in a divorce. Furthermore, spendthrift trusts can bypass probate.
If you want to set up a spendthrift trust, or any other type of estate plan, make sure you carefully review all of your options and find answers to questions that you have.