Part 5 of a series breaking down the process of helping clients set up Trusts by narrowing down the issues into smaller, individual topics, enabling the adviser and client to take the necessary steps, and get the plan moving.

Trusts can be powerful tools to protect a beneficiary from him/herself, or from the influence of outsiders who are trying to take advantage of them.

A beneficiary may not be a great money manager for any number of reasons. The beneficiary may never have been responsible with money, may have misused the help of the client in the past, or may have made poor prioritization decisions. The beneficiary may also be susceptible to the influence of others, whether because of a mental challenge or a physical limitation that makes one dependent on others. A surviving spouse, for example, may be intimidated by an adult child, or that child’s spouse, and feel compelled to provide money to stay safe.

There are a number of ways to protect these beneficiaries. Having an independent trustee who has to approve any such request for funds may be able to prevent a beneficiary from making a poor decision (buying a huge boat while unemployed) or seeking money with no real quantifiable need. The trustee’s ability to make distributions may be tied to reviewing the requesting beneficiary’s budget and income sources, or only having authority to distribute funds for support, or emergencies or medical purposes.

Trusts are often drafted with “spendthrift provisions” or “restraint on alienation” provisions. These provide that the trust will not be reachable by a beneficiary’s creditors in a legal action. They also prevent a beneficiary from trying to pledge his/her interest in the trust to secure money from a third party.

These situations and provisions may sound draconian but if the goal is to protect the beneficiary, whether from him/herself or others, these provisions enable the trustee to do so.  Having a strong trustee to determine if or when to implement these tools is equally essential.

In our next topic, we will discuss factors to consider when choosing a Trustee.

You can view the first series of Wills and Probate Administration here and reach out to Dan with any questions. Our attorneys are always ready, willing, and able to meet and discuss any questions, help you articulate your plan and goals, determine the best plan to accomplish them, and then implement it. You will find that, by taking those small steps, the problem that used to lead to procrastination and uncertainty has been addressed and resolved. Learn more about Mansour Gavin’s Estate Planning & Probate group or contact us today.