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Spendthrift trust may ease Florida estate concerns

Media coverage of the family dispute between the daughter of famed singer Whitney Houston and family members concerned about the distribution of the young heiress' inheritance may have some West Palm Beach readers rethinking the wisdom of leaving substantial estate assets in the hands of youthful heirs. The dispute over the singer's estate centered on concerns about the ability of a teenager to successfully manage large sums of money without falling prey to exploitation and undue influence.

With estates of any size, there may be good cause for concern about an heir's ability to manage an inheritance. The inexperience of youth may be one source of worry, but similar concerns may arise with respect to older children who have struggled with issues like substance abuse, gambling addiction or lingering debt problems. Whatever the cause for concern, a thoughtfully crafted spendthrift trust can provide a measure of confidence that hard-earned assets will not go to waste.

A spendthrift trust includes provisions for structuring estate gifts so that the beneficiary does not receive large sums of money in lump distributions. One common variety of a spendthrift clause simply staggers distributions of estate assets so that the beneficiary receives a small fraction when young and gets progressively larger gifts later in life.

Alternative spendthrift provisions may instruct a trustee to distribute estate assets in a steady stream of small disbursements. In cases of special concern, the trustee may be charged with ensuring that estate distributions are applied only to specific purposes on the beneficiary's behalf. For example, a trust could dictate that distributions be used only to pay for basic living expenses, medical needs and educational pursuits.

Trust grantors should be aware, however, that a trustee will typically be entitled to compensation for time spent administering the distribution of trust funds. Imposing too many restrictions and trustee duties poses the risk of significantly cutting into the funds left over for the intended beneficiary. An experienced estate planning professional can help Floridians craft trust instruments that will best suit their individual needs.

Source: Times Herald Record, "Protecting your Future: Use 'spendthrift' clause to protect inherited money," Bonnie Kraham, Nov. 8, 2012

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