Planning for a ‘troublesome’ beneficiary
Sometimes we don’t like to admit it but we often find ourselves with loved ones that raise additional concerns. Today I want to share some thoughts about planning for beneficiaries that may have an alcohol, drug or gambling addiction or even for a beneficiary in a difficult relationship.
While a basic estate plan is often centered around a Simple Will, power of attorney, and Health Care Proxy, a Simple Will does one thing- it distributes your estate to the intended beneficiaries. When someone is the beneficiary of an estate, the appointed fiduciary will simply write that person a check in the amount described in the Will and go home. Studies show that most people spend the entire inheritance within a few years. The real problem arises when a beneficiary has an issue such as a gambling addiction. It can be a matter of days or weeks before that money belongs to the casino. Unfortunately, the drug addicted will sell almost anything for a fix; sadly it also won’t be long before your hard earned money is gone. These issues are very important because nobody wants their hard earned money to contribute to a terrible affliction- you likely want your money to ensure that this beneficiary has a roof over his or her head or is otherwise cared for.
Additional considerations are difficult relationships of beneficiaries. If a loved one and potential beneficiary cannot manage their own money or is in a relationship where their significant other may blow money that doesn’t belong to them, or can possibly just steal the inheritance, these issues must be accounted for and discussed with you estate lawyer when crafting your estate plan.
Once somebody passes away, either without an Estate Plan or with an Estate Plan that simply did not include the various protects available, it is too late for that money to be protected and spend properly. As noted in my previous article “Why making your own Will is a bad idea” you only find out the lost potential once it’s too late.
There is a simple way to protect the beneficiaries discussed above from themselves, from outside creditors or from bad partners and it’s called a Trust. The Trust comes in many shapes and sizes and is often referred to as a mythical being that people often shy away from. Trusts dates back a thousand years and have always been used to protect, hold and distribute property. A trust is its own being, a trust can hold legal title to assets and own bank accounts but the trust is also nobody. The trust is the Trustees. Trustees are like managers of the trust and are fiduciaries bound by the terms and conditions of the trust.
With a trustee, you can direct your trustee, the person who controls the assets in the trust to spend the money for the benefit of your intended beneficiaries or direct that the trustee only distribute money if they know it will not be used for unintended purposes such as gamble, drugs or creditors. For a free consultation on how to best accomplish estate planning for your specific and unique family please call us at (718) 838-3334.