Ensuring Inheritances are Spent Appropriately

Ensuring Inheritances are Spent Appropriately

Trust funds are created with the intent to provide for a loved one financially. Despite this, some grantors may be concerned that beneficiaries will squander allocated funds once they start receiving an inheritance. Fortunately, there are provisions that exist to help regulate the use and distribution of assets.

Spendthrift provisions

A spendthrift provision is specific language included in the clause of a trust that has the sole focus of limiting unnecessary or unwise spending. These provisions may be especially helpful when a grantor leaves funds to a young child or adolescent who has not yet learned how to manage money. Spendthrift provisions require detailed language that cannot be circumvented or negotiated.

These provisions can also be incredibly important when it comes to protecting the funds from being taken by creditors to satisfy a debt owed by the beneficiary. Such clauses may prevent the beneficiary from promising part of their future assets to a creditor.

Regulation from a trustee

Furthermore, assets in a trust are always regulated by a trustee, who pays the beneficiary. Trustees have a legal responsibility to manage allocated funds according to the terms of the trust’s contract, which includes making payments in agreed-upon amounts. For example, if the trust requires annual payments to the beneficiary, it’s the trustee’s responsibility to distribute only the amount listed in the contract.

The trust may also specify that the trustee must hold on to all funds until the beneficiary reaches a certain age. Finally, trusts may be set up for specific milestones in the beneficiary’s life and can be saved for college tuition or purchasing a home. Both of these provisions help to improve the chances that the trust’s funds will be used according to the grantor’s intentions.

If you would like additional guidance on how to regulate the distribution of your assets in your estate plan, meet with the skilled Tampa will and trust attorneys at BaumannKangas Estate Law.