Estate planning can sometimes become difficult if you’re not sure how your heirs are going to use your money. For example, some individuals are concerned that an heir who struggles with addiction may simply use all of their inheritance to fund that addiction, and they don’t want them to do so.
But there are many ways that this problem can arise, such as if you have an heir who struggles with spending and debt issues. Maybe they have a lot of outstanding debt that they haven’t paid back. Maybe they take out risky loans, and you’re concerned about the future, even though they technically haven’t run into any debt problems yet. You do not want the money that you leave them in an inheritance to simply go to their creditors, but can you prevent this from happening?
You may want to use a trust
One way that people will do this is to put the inheritance in a trust. They can then assign a trustee and a beneficiary, with that beneficiary being the heir.
But the heir doesn’t actually own the trust at that point. They are simply allowed to use the money as the trustee permits. For instance, you could say that the money can only be used for a college education or something of this nature. Since the money is not in your heir’s name and is not part of their personal estate, their creditors are often prevented from claiming that money, and it can still be used for the reasons you intended.
As you can imagine, it’s important to get all of the details right, so be sure you know what steps to take.