Planning for the future is an important financial step for people living in Mokena, Illinois. There are many different mechanisms by which you can set your heirs up for financial success. However, not everyone may be as financially savvy or as responsible as you are. If you have an heir that you worry may squander his or her inheritance by overspending or by racking up excessive debts, you may want to consider a spendthrift trust.
Under this type of instrument, the beneficiary receives payouts from the trust. The amounts, frequency and purpose of those payouts shall be dictated by the trust agreement and overseen by the trustee. However, according to the Huffington Post, the principal that remains in the trust, along with any income it generates, are largely immune to seizure by creditors. This means that even if your heir behaves irresponsibly, the bulk of his or her inheritance will remain untouched.
For example, say your daughter purchases a home and falls behind on the payments. While the bank can come after any amounts that were recently distributed to her from the trust, the funds remaining in the trust are protected. This is also generally true should she file for bankruptcy or go through a divorce.
In order for those protections to remain in place and withstand a challenge in court, the construction of the trust must be undertaken carefully. Specific language concerning the intent and allowed uses for the trust must be clearly articulated. This is provided as general information on this topic and is not intended to be legal advice.