Estate planning when your family members are bad with money

| Nov 5, 2020 | Estate Planning, Trusts |

Every family has one: a loved one who just isn’t good with their money. Perhaps, this loved one buys new cars every three years, even though they can’t afford them. Or they have thousands in credit card debt because they can’t stop buying designer clothes. Or your loved one struggles with addiction and has blown through thousands over the years.

When you are making your estate plan, how can you account for family members who are bad with money? Do you want to give them an inheritance they may squander within a few years?

Establishing a trust

One way you can assure that a family member doesn’t blow through their inheritance from your estate is to establish a trust. With a trust, you can stipulate when your loved one will receive money from it. For example, you can set up that this family member will receive a set monthly stipend from the trust. Or you can limit your loved one to only receive a percentage of the trust’s value or only receive interest earned from the trust.

You can name a trustee to handle the trust, allowing that person to provide only necessary living expenses for your loved one. You can limit your trustee from giving a family member money from the trust if the trustee believes your loved one is using the money to fuel an addiction or a gambling habit.

You could specify that your family member receives a certain percentage of the trust at age 30, with more coming at age 40 or 50. You could set up the trust to distribute assets based upon how much income your loved one earns each year.

Getting help with estate planning

If you have a situation where you don’t want a loved one to squander their inheritance, you should work with an estate planning attorney. An attorney can advise you on what type of trust to establish so you can distribute your estate’s assets in the best way for your loved ones.