Imagine you are a teenager becoming a legal adult and finding out you have $250,000 all at once. This scenario happened to a young man in the northwestern suburbs of Illinois. He wrote about his experience in an article titled, “What blowing a $250K inheritance taught me.” After turning 18, this young man received a quarter of a million dollars from his mother’s medical malpractice case, intended to set him up for a bright future. Without guidance or a plan, the young man spent the money on frivolous things.
Many families make the common mistake of not managing the distribution of inheritance through a trust. Minnesota residents intending to transfer wealth to an heir or heirs should consider a trust that prevents a teenager or young adult from making impulsive monetary decisions. After reading the young man’s story, this article discusses trusts as a strategy to prevent your young adult heirs from falling into the same trap.
How Do Trusts Protect Minnesota Heirs From Making Inheritance Mistakes?
Our young friend embarked on a journey with new wealth but needed money management experience or an estate planning strategy that preserved the money. Individuals and families in Minneapolis, Edina, and Woodbury passing their wealth to minor or young adult heirs can use estate planning strategies that prevent impulsive purchases and detrimental choices with their inheritance.
Establishing a trust in the Twin Cities is beneficial in several ways. If your beneficiaries are minors or young adults, a spendthrift trust provides an independent trustee as the voice of reason for a young heir.
Watch our Spendthrift Trusts video to learn more about these types of trusts.
Why Establish a Spendthrift Trust in Minnesota?
A spendthrift trust is an estate planning tool protecting inherited wealth from creditors and a beneficiary’s impulsivity. The grantor funds the trust and appoints a trustee to distribute property or assets according to outlined terms, which can include conditions that prevent frivolous spending. Setting up a spendthrift trust is a strategic move that gives you peace of mind, knowing that your hard-earned legacy is safeguarded and managed in ways that provide for future generations. Read more about trusts in our article,“Surprising Ways Revocable And Irrevocable Trusts Future-Proof Your Minnesota Estate Plan.”
A spendthrift trust offers a myriad of benefits:
- Asset Protection: Protect your assets from creditors, lawsuits, and taxes as well as from themselves.
- Fund Distribution Control: Specify how and when your beneficiaries receive their inheritance, promoting responsible spending and long-term financial security.
- Legacy Preservation and Privacy: Safeguard your assets from frivolous spending and shield trust documents from public record.
If you’re ready to take the next step in safeguarding your beneficiary’s inheritance, Book A Call with our Minneapolis, Edina, and Woodbury estate planning office to learn how to get started.
Young Adult Inheritance Key Takeaways:
- Teenagers Inheriting Wealth: Teenagers inheriting wealth struggle to make spending and investment decisions that preserve their inheritance.
- Teenager Inheritance Management: Heirs are guided in managing their inheritance.
- Spendthrift Trusts: Spendthrift trusts safeguard assets from creditors and irresponsible spending, so your wealth benefits future generations as intended.
Conclusion
The story of the young man who lost $250,000 is a powerful reminder of what’s at stake when parents leave their money in outright distributions to children. A spendthrift trust empowers an independent trustee to distribute assets responsibly.
Consulting with the trusted estate team of Stone Arch Law Office in Minneapolis, Edina, or Woodbury will clarify how to create a trust designed uniquely for your circumstances. Book A Call with our team to get started.
Reference: The Week, published initially on LearnVest.com (Jan. 10, 2015) “What blowing a $250K inheritance taught me.”
