Do you have an heir who just does not know how to handle their money? They always seem to spend everything that they have. They make purchases that you think are unneeded and unwise. You have tried to teach them how to budget and save, but it never seems to click.
As such, you’re worried about creating an estate plan that leaves money to your child. You think they’ll just blow their entire inheritance in the first year and have nothing left. You worked far too hard for that money to let that happen.
Plus, you’re looking out for your heir’s future. You want to protect them from themselves. The money you have for them could last for years if they use it correctly. What can you do to make sure they don’t waste it all?
One option is to use annuities. People often use these distributions to fund their own retirement, but there are steps you can take to make sure that the payments go to a beneficiary if you pass away. This can last for years, and it spreads the money out. You still have a way to support your heir, but you do not just give them a lump sum as soon as you pass away.
Using life insurance
One thing that people often consider along with annuities is using life insurance. This can be beneficial, as it increases the value of your estate dramatically when you pass away.
The problem, of course, is that the person may just waste all of the life insurance money. While it’s not money that you “worked for” in the same sense as your savings, you still want to protect it. One way to do it is to have the life insurance pay out into a trust and then have the trust pass the money to your heir in small increments or for a specific purpose.
Of course, you do not have to use life insurance to use a trust. You can fund it with the assets you already have. A trust is a great way to protect a spendthrift heir from themselves because it gives you control over when they get the money, how much they get, what they can use it for and many other things. You can design a specific trust and support your heir without allowing them to waste the money.
As you can see, though your worries about your heir are not misplaced, there are plenty of steps you can take to plan for that person and their unique needs. Make sure you carefully look into all of your options.