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An asset protection trust could become part of your estate plan

On Behalf of | Jun 22, 2021 | Estate Planning

If you have worked hard all your life, you may have acquired significant assets and properties you intend to leave to your heirs. But you are unsure if these heirs are well-equipped to be a good steward of all you worked so hard to obtain.

Many otherwise upstanding and well-intentioned individuals have been undone by the gift of sudden wealth. Whether it was through lottery winnings or inheritances, there are hundreds of stories of bankruptcies, scams, spirals into drug and alcohol addictions and even deaths that can be tied to the acquisition of unearned wealth. How can you avoid such a scenario for your own heirs?

Consider an asset protection trust

These types of trusts are often referred to as spendthrift trusts. During your lifetime, you can fund an inter vivos trust. Alternatively, your assets can be converted upon your death into an asset protection trust through provisions you include in your last will and testament.

You also have the option of adding spendthrift provisions to a trust that already exists should you feel the need to do so. 

Do these trusts cover all heirs?

Not necessarily. Presumably, if there is already a trust in existence, you have planned to leave assets to your heirs with no spendthrift provisions included. But during their lifetimes, one or more heirs may have shown through their actions that they are incapable of responsible fiscal management. You can include provisions that restrict these heirs’ access to the trust principal and only allow them disbursements at intervals you predetermine.

You appoint a trustee to manage the trust

Rather than give your heir(s) access to the trust and its principal, you appoint a trustworthy individual to oversee the assets and make disbursements. It is strongly suggested that you choose an unrelated third party as the trustee to preserve family harmony among siblings and between parents and children. Your estate planning attorney can help you sort through your options and arrive at the best solution for all.