If you are fortunate enough to be able to gift assets to loved ones, either during your lifetime or after you are gone, you undoubtedly hope that those assets will be appreciated and protected. Unfortunately, that is not always what happens. The Grand Forks asset protection attorneys at German Law warn about the squandering beneficiary. The good news is that with careful estate planning a squandering beneficiary cannot squander too much of your assets!
Gifting Basics
For many people, one of the most important estate planning goals is to be able to pass down estate assets to loved ones. For that to happen, you must work hard, save faithfully, and invest wisely. Once you have amassed a decent sized estate you must then worry about protecting that estate so you have enough assets left to pass down at the end of your life. The simplest way to pass down assets is by making gifts in your Last Will and Testament. While gifting through a Will is certainly straightforward, it isn’t always the best way to make gifts to some beneficiaries, specifically those beneficiaries who are likely to squander the assets gifted to them.
The Squanderer
The primary drawback to gifting in a Will is the fact that once a gift has been made through the terms of a Will the beneficiary can do whatever he/she wants with the asset gifted. That can be problematic if the beneficiary is a “squanderer” or if the assets are at risk of being squandered. What exactly is a “squanderer?” In short, a squanderer is a beneficiary who runs through his/her inheritance with nothing to show for it. Certain types of beneficiaries are more likely to squander the inheritance gifted to them, such as those who are particularly young or immature or those who have a substance abuse problem, shopping, or gambling addiction. The inheritance you worked hard to amass and pass down could disappear virtually overnight if handed over to a squandering beneficiary. Often, these beneficiaries do not set out deliberately to squander the inheritance left to them; however, one way or another they end up with nothing left of it.
How Can You Protect Assets from a Squandering Beneficiary?
The good news is that there are ways to protect your hard earned assets from being squandered and still provide for beneficiaries. The key is careful estate planning that includes asset protection tools and strategies. For example, instead of gifting assets to a beneficiary through the terms of your Will, why not create a trust instead? In fact, a trust is an excellent way to protect a beneficiary for himself/herself.
When you create a trust you must appoint a Trustee whose primary function is to protect trust assets and administer the trust terms. The trust terms, which you create, can then be used to determine not just when trust assets are to be distributed, but why and how as well if you wish. For instance, if you wish to provide for a child who is an adult, but just barely, you might create trust terms that stagger the distribution of trust assets. As the beneficiary ages and (hopefully) gains maturity, trust distributions will increase in value and/or frequency. If your intended beneficiary has an addition problem, you can use the trust terms to both protect assets and encourage the beneficiary to seek help. For instance, a term could authorize the use of trust funds for rehabilitation. Another term could specify that distributions are to be paid out directly to a landlord or bank instead of handed over to the beneficiary who might squander the funds.
If you are concerned about the possibility of a squandering beneficiary among your loved ones, sit down and talk to your estate planning attorneys about incorporating asset protection strategies and tools in your estate plan.
Contact Grand Forks Asset Protection Attorneys
If you have additional questions or concerns about asset protection, contact an experienced Grand Forks asset protection at German Law by calling 701-738-0060 to schedule an appointment.
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