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Spendthrift trusts when a beneficiary mismanages money

It is fairly common for New York families to have at least one adult child who is not good with handling his or her money. In that situation, the parent might worry about leaving the child a large sum of money under a will.

It is reasonable for a parent to worry about leaving large sums to children who do not handle money well. It can also be difficult for people who do manage their money well to handle suddenly receiving a large bequest. Parents who are concerned can set up their estates to pass in such a way that their children will have help with managing their inheritances.

A parent who has a spendthrift child can set up a trust as one way of handling this issue. The grantor may detail when distributions are made to the child as well as the amounts. Alternatively, the trustee can determine when to make distributions. It is probably better for the grantor to choose a financial institution or a trusted friend or adviser to be the trustee. When one child is the trustee for a spendthrift trust benefiting another, it can lead to bad blood between the siblings.

A revocable trust set up during a grantor's lifetime will become an irrevocable trust once he or she dies. This means that it will not be able to be changed following the grantor's death. An irrevocable spendthrift trust might be a good way for a parent to make certain that his or her child will be taken care of without worrying that the child will squander his or her inheritance. People might want to discuss this and other estate planning needs with their attorneys.

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