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Is a spendthrift trust the right choice for your heirs?

Good parents realize that loving their children means preventing them from harm. It also means that they may need to step in at times and protect them from their own worst inclinations. Unfortunately, for some parents, the need to do this doesn't stop when their children reach adulthood.

You know your children better than anyone else. You've had a lifetime to watch how they comport themselves with money and responsibility. If you know that leaving your adult children with a lump sum of money will be problematic for them, you will do them no favors to give them unfettered access to their inheritance.

Enter the spendthrift trust. This handy estate planning tool can be used by parents who have no intention of disinheriting their adult children but who also wish to prevent their lives from becoming undone by sudden access to money.

Funding a spendthrift trust allows you to provide for your adult offspring after your death but to structure their inheritance so that it will last them a lifetime rather than be frittered away in months or years. You determine the terms of the disbursements. You can set it up so that they receive an annual, biannual, quarterly or monthly disbursement from the trust. You select a trustee to oversee the trust and its disbursements.

In some circumstances, e.g., when alcoholism, drug addiction or compulsive gambling is a problem, you might even structure the trust so that your beneficiaries have no direct access to the funds whatsoever. The trustee can instead cover the living expenses of your heir, forcing them to continue working or to get a job if they want to spend money unwisely.

Spendthrift trusts can also shelter assets from plaintiffs in lawsuits and heirs' creditors. But they are not for everyone, as they can foment resentment between siblings if one child's access to funds is restricted and the other's is not. Your Oshkosh estate planning attorney can review your circumstances and make a recommendation for how to proceed with your estate plan.

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