As we have mentioned in previous blogs, funding a spendthrift trust is a good way to protect your beneficiaries from their worst instincts regarding money. But when you are adding one to your estate plan, there is something else that you may want to consider.
Choosing an unrelated third party as the trustee is often a better decision than appointing a relative as the trustee over another relative’s trust fund disbursements.
Preserve family relationships after you pass on
If you choose one adult child to oversee the spendthrift trust of their sibling or child, you could unwittingly damage that relationship. Even if the trustee and beneficiary had previously enjoyed a good relationship, appointing one to manage and disburse the trust’s funds for the other creates an imbalance of power.
If the two had previously butted heads or have a generally fraught relationship, this new status change can only further foment ill will between the relatives you presumably love.
Make decisions that will cause fewer problems
Spendthrift trusts can be a touchy subject, especially if some named beneficiaries have no such restrictions on their inheritances and are trustees over the funds of others with restricted access. While you may not have intended to create bad blood between siblings or other related beneficiaries, your legacy could do just that regardless.
Seeking guidance can avoid future unpleasantness
Your next question may be, “Well, if I don’t choose a family member for this important task, whom shall I appoint?” There are many other options available to you, including retaining a financial aid planner or estate planning attorney to oversee the management of the spendthrift trust.