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Leaving money to a spendthrift is not always straightforward

Almost everyone has heard stories about people who acquired large amounts of money and spent it all frivolously in a short period of time. Sometimes this happens after someone wins the lottery, but sometimes it happens when someone inherits a large sum of money outright.

There are actions you can take to help prepare your children for the wealth they may eventually inherit, but you often cannot control someone else's behavior. If you have children who do not have good money management skills, it may be necessary to protect them from themselves.

A spendthrift trust can help protect beneficiaries

A spendthrift trust can help you prevent your adult child from squandering all his or her inheritance at once. This type of trust allows you to leave money for your child, but have someone else, called the trustee, manage the assets on your child's behalf.

The trust can last for your child's lifetime or for a set number of years. It also allows you to set rules for the distributions your child will receive.

Some beneficiaries need protection more than others

Inheriting outright may not be in your child's best interests if he or she has significant debts. This is because creditors may be able to take your child's inheritance to satisfy those debts.

Inheriting outright could also lead to trouble for a child who struggles with addiction. Access to significant wealth might make it easier someone with a drug or alcohol addition to overindulge, which could risk his or her safety. Someone with a gambling addiction might lose all the money in a game.

However, a spendthrift trust can ensure that your child receives his or her inheritance in small amounts over time. Because your child will not have control over the total inheritance, creditors will also lack access to the total sum.

As a parent, it is natural for you to want to help your children succeed in life. However, that does not necessarily mean that you trust each of them with a large amount of money. In some situations, a spendthrift trust can be a good way to leave money for those children who are not financially savvy.

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