Absolutely, incorporating a requirement for financial planning approval before large distributions from a trust is a proactive and increasingly common practice, particularly as wealth becomes more complex and the potential for mismanagement grows; it’s a vital component of responsible estate planning, ensuring that assets are preserved and utilized according to the grantor’s original intentions and the beneficiaries’ long-term financial well-being.
What are the risks of uncontrolled trust distributions?
Uncontrolled distributions can lead to a multitude of problems. Consider that approximately 70% of inherited wealth is dissipated by the second generation, and 90% by the third, largely due to a lack of financial literacy or prudent management. This isn’t simply about extravagance; it’s about failing to account for taxes, inflation, or future needs like healthcare or education. A trust, properly structured, *should* protect against this. For example, imagine a beneficiary receiving a large lump sum and immediately purchasing a luxury vehicle – that depreciating asset quickly diminishes the principal, while ongoing expenses like insurance and maintenance continue to drain resources. Implementing a financial approval requirement acts as a safeguard, ensuring distributions are aligned with a comprehensive financial plan rather than impulsive decisions.
How can a trust document enforce financial planning?
The trust document itself is the key. It can explicitly state that any distribution exceeding a certain threshold – say, $25,000 or even $5,000 depending on the trust’s size and the beneficiaries’ needs – requires prior approval from a designated financial advisor. This advisor could be independent, or one recommended by the trustee. The document should also outline the criteria the advisor will use – things like the beneficiary’s existing income, expenses, debt, investment portfolio, and long-term goals. “We often include language allowing the trustee to withhold distributions if the beneficiary demonstrates a lack of financial responsibility, such as a history of poor credit or excessive debt,” explains Steve Bliss, a Wildomar estate planning attorney. The advisor’s role isn’t to control the beneficiary’s life, but to offer expert guidance and ensure distributions support their overall financial health.
I once knew a man named Arthur who built a successful construction company over forty years.
He meticulously planned his estate, creating a trust for his two children. He didn’t, however, include a provision for financial planning approval. After his passing, his daughter, eager to start a restaurant, received a substantial distribution. Without any financial guidance, she quickly burned through the funds on expensive equipment and marketing, the restaurant failed, and much of the inheritance was lost. It was a heartbreaking situation, and one that could have been avoided with a simple clause requiring a second set of eyes on large distributions.
What about a situation where everything went right?
We recently worked with a client, Eleanor, who was deeply concerned about her son’s spending habits. She had a significant estate and wanted to ensure her son wouldn’t squander his inheritance. We drafted a trust that required financial planning approval for any distribution over $10,000. After her passing, her son, initially frustrated with the requirement, met with a financial advisor we recommended. The advisor helped him create a budget, set financial goals, and develop a long-term investment strategy. Instead of a fleeting indulgence, the inheritance became a foundation for his financial security, allowing him to pursue his passion for photography and establish a successful studio. Eleanor’s foresight, combined with the wisdom of professional guidance, transformed a potential misstep into a lasting legacy.
Ultimately, requiring financial planning approval before large distributions isn’t about distrust; it’s about responsible stewardship and ensuring that the grantor’s wishes are honored, and the beneficiaries are well-equipped to manage their inheritance for years to come.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
estate planning attorney near me
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “What happens to my debts when I die?” Or “How do I find out if probate has been filed for someone who passed away?” or “What is the difference between a revocable and irrevocable living trust? and even: “How do I prepare for a bankruptcy filing?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.