Many people in the Buffalo area have loved ones who for a variety of reasons have periodic financial struggles.
In some cases, the struggles involve irresponsibility with money or just immaturity.
In other situations, the loved one may be struggling with an addiction, a mental illness or some other personal challenge that make it hard for them to hang on to money.
It is also important to remember that New Yorkers who are extremely financially responsible can wind up in debt.
Job losses, medical emergencies and business failures affect people all the time. Likewise, divorces and other lawsuits or legal trouble can also expose a person to a sudden financial hardship.
No one who has worked hard to leave a legacy to their loved ones wants to see their money go instead to that person’s creditors. On the other hand, they may still want to support their loved one despite that person’s financial struggles.
People in this dilemma can use estate planning to help them both support their loved one and do what they can to make sure their legacy stays in the family.
For example, New York allows its residents to create what are called spendthrift trusts. The terms of these trusts can be complicated. Moreover, it is important that someone interested in creating a spendthrift trust do so correctly and thoughtfully.
Basically, a spendthrift trust will allow a person to transfer property to their loved one with some important limitations.
The trust document will include a provision that restricts the income a person will receive and prevent that person from selling off or transferring their interest in the trust. The upshot is that creditors will find it difficult if not impossible to take trust assets to satisfy the loved one’s debts.
There are some limits to the protection a spendthrift trust offers. For example, spendthrift trusts are ineffective against IRS liens and alimony and child support debts.
Still, residents of the greater Buffalo area should consider a spendthrift trust as one of their alternatives for accomplishing their estate planning goals.