On April 10, 2014

As wealth increases for families in Colorado, caring for loved ones becomes an inevitable concern when it comes to passing on the family fortune. Trust administration is one way to ensure assets are left to beneficiaries in a productive and manageable way.

The temptations of wealth have proven to get the best of most people when faced with the responsibility of sudden high net worth. Wastefulness may occur, turning once cherished heirs into lazy, listless individuals. Worse, there could be creditors or ex-spouses waiting to take advantage of beneficiaries by positioning themselves to get their share regardless of how unfair it may seem. Managing the distribution of assets under the careful crafting of a trust protects both the family and the assets.

Various clauses included in the construction of a protection trust allow it to function in a prescribed manner. A discretionary clause may call for implementing a trustee who is able to make trustworthy decisions regarding how payments are made. A family trust has a standard means of creditor protection if an estate planner uses a spendthrift clause, although it is not absolute. Milestone or stepping stone trusts institute a gradual payment plan that allows a young beneficiary the opportunity to mature over time. The goal is to encourage a useful, productive life while preserving incentives.

These are just a few of the conditions used when crafting protective trusts, and while it may not be possible to think of every contingency, it is clear to see there are methods that allow for reasonable controls to be established. Discussing target goals with an estate planner makes it possible to strike the right balance between a micro-managed trust and one that has no restraints at all. Planning in advance with the ability to adapt to change protects wealth and gives heirs a proper chance to come out ahead.

Source: Investing Daily, “Using Protection Trusts to Help Heirs“, Bob Carlson, April 04, 2014

Categories: Trust Administration

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