Estate planning enables you to control the transfer of your assets in Illinois when you die. You create plans to reduce the involvement of probate court, minimize estate taxes and prevent/minimize creditor access. What can you do to prevent your heirs from squandering away all the fruits of your labor? Though your voice is no longer heard once those assets change ownership, you can structure your estate plans to include provisions when concerns about financial irresponsibility exist.
One type of provision you can use in your estate plans to protect your estate from financially irresponsibility involves trusts. Trusts enable you to leave behind instructions to protect your beneficiaries from their spendthrift ways. It also enables you to protect their inheritances from other parties who could try to benefit from the gift at their expense, i.e., creditors and ex-spouses. Here are some additional ways you can protect your estate from financially irresponsible heirs.
Purchase an annuity
You could place your loved one’s inheritance into an annuity that pays them a set amount for a specified length of time. Annuities provide one-time payments and have strict distribution rules that can make it difficult for your loved ones to access emergency funds. However, they are a good option for individuals who may need a little oversight and are unable to manage large sums of money themselves.
Create and fund a spendthrift trust
Use a variety of trusts to protect your estate from financial mismanagement and your heirs’ creditors, such as a spendthrift trust. Once you create a spendthrift trust, you should choose someone trustworthy and financially responsible to serve as its trustee and name your relative (heir) as the beneficiary. The trustee maintains control over the trust. Her or his role is to manage all property and assets included in the trusts’ responsibly and in the best interests of the beneficiary, with regards to any instructions you leave behind, such as payment amount and frequency. You can also require them to achieve certain milestones, like complete college, and improve themselves in ways that eventually allow them to take over control of their inheritances.