3 Things to Remember About Passing Assets to a Financially Irresponsible Beneficiary

Sometimes creating an estate plan means more than just simply designating who will receive your assets. Instead, it sometimes becomes critical to think about how a loved one will receive what you leave them. Fortunately, estate planning presents the opportunity to contemplate the particular needs of your beneficiaries as well as the structure of such transfers. One of the most common but serious obstacles that exist in passing assets to a loved one is if a beneficiary is financially irresponsible.


Understandably, after decades of working hard, you want to make sure that the assets you pass on to loved one can be fully utilized. If a loved one does not treat assets with the same serious nature that you do, however, this intent can quickly defeat your estate planning goals. Fortunately, there are estate planning strategies that are available to make sure that assets last a long time and are responsibly managed. This article considers just some of the critical issues to remember about passing assets on to a beneficiary who is financially irresponsible.


# 1 – The Role of Trusts


One of the best strategies to protect an inheritance is to utilize a trust. While the trust will own the assets, the beneficiary will own the assets. A responsible trustee will be assigned the critical task of making sure that the asset is distributed responsibly. The trustee will help to make sure that assets are not squandered. 


# 2 – Trusts Can Be Structured in Various Ways


Based on the trust creator’s goals as well as other details, trusts can be structured in various ways. Some of the most common types of trusts utilized to pass on assets to financially irresponsible beneficiaries include:


  • Annuities, which involve trusts that are distributed over a time period based on a payment schedule. In many cases, payments are made in equal amounts yearly.
  • Some incentive trusts (or “pay for performance” trusts) include conditions that the beneficiary must satisfy before distributions can be made. Many parents use the achievement of educational goals as the conditions that must be met.
  • “Age-based trusts” pass distributions to a beneficiary when the beneficiary reaches a certain age
  • Annual distributions in “income-matching” trusts are made by making sure that the amount distributed matches the beneficiary’s income or a fixed percentage of the beneficiary’s income


# 3 – The Role of Non-Monetary Assets


Besides trusts, people sometimes decide to pass assets on to loved ones through non-monetary assets. This means that a person might leave a parcel of property or an art collection to a beneficiary. To make sure that the beneficiary does not end up squandering the value of this property, the property is often placed in a trust that requires money from any sale to be reinvested.


Contact an Experienced Estate Planning Attorney

Remember, there is no universal solution for how to leave assets to beneficiaries. You will need to cautiously consider each of your available options for transferring assets as well as the personality and nature of each beneficiary. To make sure you have the strongest estate plan possible, you should not hesitate to speak with a knowledgeable lawyer. Contact Ettinger Law Firm today to schedule a free case evaluation.

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