You’ve spent decades building your wealth. You’ve worked very hard for the money that you’ve earned. You’ve made wise financial decisions. Now that you’re making an estate plan, you’re planning to leave a significant portion of that wealth to members of the younger generations in your family.
Unfortunately, you may be worried about some of your heirs. Perhaps they don’t make the same types of financial decisions that you do. You worry that they’re going to squander their inheritance. Is there any way for you to prevent this, other than simply disinheriting them and leaving them nothing?
You could set up a discretionary trust
You certainly do not have to disinherit anyone to keep them from squandering the money that you have earned and/or saved. One tactic could simply be to create a specific kind of trust.
For example, a discretionary trust will allow you to set funds aside for an heir, but they are not actually guaranteed to get those funds. This is much different than leaving the money to them via your will. When you pass away, they are not given a check by the executor of your estate. Instead, the assets that you have set aside remain in the trust.
What you’ll have to do in advance is to choose a trustee and give them the power to use their own discretion regarding payouts to your heirs. They can determine when your heir(s) should get the money, for instance, and what they can use it for.
This arrangement can give you more control and an element of flexibility simultaneously. You can simply talk to the trustee about how you would like the money to be used and the things that you believe are valuable. Maybe the trustee knows that you would support paying for a college education, for instance, or paying the down payment on a new family home. But you would not support your heir using the money to make frivolous purchases or to simply quit their job in order to loaf around.
In this way, the discretionary trust still allows you to leave money to all members of your family. But you also have the ability to keep them from wasting it and to ensure that your money is put toward valuable purposes.
Setting up the trust
The key is to get all this in place well in advance. Make sure that you know exactly what legal steps you need to take to set up a trust that will advance your interests and help to protect your loved ones as well. Speaking with an attorney is usually the best first step forward when it comes to any kind of estate planning effort.