As a parent, you worked diligently to instill good values in each of your kids. While you know your children have grown into decent adults, you may worry about your son’s or daughter’s spending habits. That is, your adult child may be too willing to spend money frivolously.
Even though you do not want to leave your child penniless, you intend to protect your assets. As part of your comprehensive estate plan, setting up a spendthrift trust may do the trick. Specifically, the trust may keep your assets safe while teaching your son or daughter some financial responsibility.
Putting limits on the trust
According to reporting from the Daily Beast, some of the world’s best-known billionaires had trust funds. These individuals, of course, went on to accumulate considerable wealth on their own. Even if you have billions of dollars at your disposal, you probably want to put some limits on the funds your child can access.
A spendthrift trust does just that. While your son or daughter benefits from the trust, there are disbursement limits. Specifically, when you establish the trust, you decide how much you are willing to permit your child to withdraw.
Teaching financial responsibility
If your adult child has a history of being financially irresponsible or reckless, a spendthrift trust may teach him or her some financial responsibility. That is, because of your disbursement limits, your son or daughter may learn to live on a budget.
Even though providing for your child is noble, you cannot allow him or her to waste your estate. Ultimately, forming a spendthrift trust may give both you and your adult son or daughter some peace of mind.