You may be hesitant to leave your inheritance to an heir with a history of making bad financial decisions. We have all heard stories of someone who was left a lump sum of money but spent it too quickly due to a lack of guidance on how to use it. An estate planning attorney can help you find solutions, such as setting up a trust.
A trust is a legal tool that allows you to put restrictions on the distributions of your assets. For example, you could set up terms that would grant your loved one a fixed percentage of the assets annually. Another approach could be to give a trustee the authority to determine when an heir would receive money and what the amount would be.
How Should I Pick My Trustee?
You should exercise caution when selecting your trustee. For some, choosing a sibling could lead to bickering among family members. Instead, you could choose a close family friend or enlist the assistance of a financial institution that provides trustee services.
Tips to Keep in Mind When Setting up a Trust
There are a few things to consider when setting up a trust, including:
- Make sure your inheritance matches your intentions. For example, do you have a loved one with special needs? A grandchild you wish to assist with college?
- Educate your heirs. Consider inviting your trustee to financial appointments.
- Create controls. An estate-planning attorney can help set up “spend thrift” provisions.