How to give money to someone who’s bad at conserving it

Imagine you’re planning your estate, trying to decide how you want to distribute your assets after you die. This money and other property is the product of a decades-long and prosperous career. You’ve only managed to hang onto it because you’re frugal and wise about managing money.

In fact, everyone in your family is excellent at conservatively managing their money, too — except for your daughter. She’s a free-spirited, self-sabotaging “spendthrift.” In other words, if you give her a few hundred dollars, she’ll spend it on something frivolous before it gets in her hands.

All that being said, you love her from the bottom of your heart and you want to treat her the same as everyone else in your estate plan. You’re just worried that she won’t be able to manage the money wisely, and it won’t be available to benefit her for many years to come.

How can a spendthrift trust help?

Fortunately, a spendthrift trust could be the answer you need. A spendthrift trust is an estate planning vehicle that allows you to leave money for the benefit of someone who needs a helping hand when it comes to asset management. You can put money into a spendthrift trust, and then draft the trust in such a way that it parcels out its contents to your beneficiaries in a slow, metered and methodical fashion.

Perhaps your spendthrift trust parcels out $800 a month to your daughter for the rest of her life. If appropriately managed by the named trustee of the trust, the spendthrift trust assets might be able to produce a reliable income supplement for your daughter for the rest of her life.

In addition, since your daughter won’t be the direct owner of the trust assets, they will be protected from creditors who try to sue your daughter for money she owes them. Additionally, the assets will be protected from bankruptcy liquidation, and various forms of litigious proceedings — like a personal injury action.

Do you think a spendthrift trust could help your heirs or beneficiaries? Learn more about this estate planning strategy and other strategies to evaluate your legal rights and options under Minnesota trust planning law.

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