When it is necessary to protect the best interests of beneficiaries by funding spendthrift trusts, great care should be taken when designating the trustees to oversee, manage and disburse funds to your loved ones.
While it might seem easier to appoint a close relative for this very important role, that is actually counterintuitive in most cases. Below are some reasons why it may be better to appoint an estate planning professional instead.
It shifts the balance of power in relationships
Not all beneficiaries need the restraint of spendthrift trusts to rein in their tendencies to overspend or throw money away on unhealthy pursuits like drink or drugs. But once you have made your decision, consider the potentially adverse consequences of appointing a sibling, parent or child of a beneficiary as trustee.
Formerly convivial relationships between siblings or ones that span generations can be weakened or even destroyed when one of the parties controls the purse strings for the other’s funds. You certainly don’t want that to occur.
Professionals maintain a higher level of competency
While you might think that your financially savvy daughter is the best person to manage your grandchild’s spendthrift trust, that might not be the case. Being able to balance a checkbook and live within their means does not equate to being adept investors for a large trust.
Professionals unlikely to be manipulated by beneficiaries
Some spendthrift trusts are designed with emergency funds that can be accessed in the event of a financial or medical catastrophe. But manipulative beneficiaries can create scenarios where they appear to need additional funds. A financial professional is far less likely to be swayed by fictitious circumstances than a concerned relative might be.
By working closely with your estate planning professional, you can draft and fund a spendthrift trust that best serves your intentions and the needs of your beneficiary.
