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How Does a Spendthrift Trust Protect Heirs From Themselves?
Protecting Heirs with Spendthrift Trusts
“What steps can be put into place to ensure an adult child, who makes poor decisions, will be secure after the death of the parent? The main asset is life insurance.”
This is not an unusual question for most estate planning lawyers—and in most cases, the children aren’t bad. They just lack self-control or have a history of making poor decisions. Fortunately, there are solutions, as described in a recent article titled “Estate Planning: What to do to protect trusts from a spendthrift” from NWI.com.
The Role of Estate Planning in Supporting Responsible Inheritance
What needs to happen? Plan to provide for the child’s well-being but keep the actual assets out of their control. The best answer is the use of a trust. By leaving money to an heir in a trust, a responsible party can be in charge of the money. That person is known as the “trustee.”
People sometimes get nervous when they hear the word trust, because they think that a trust is only for wealthy people or that creating a trust must be very expensive. Not necessarily. In many states, a trust can be created to benefit an heir in the last will and testament. The will may be a little longer, but a trust can be created without the expense of an additional document. Your estate planning attorney will know how to create a trust, in accordance with the laws of your state.
Creating a Testamentary Trust in a Will
In this scenario, the trust is created in the will, known as a testamentary trust. Instead of leaving money to Joe Smith directly, the money (or other asset) is left to the John Smith Testamentary Trust for the benefit of Joe Smith.
Customizing Trust Terms for Beneficiaries
The terms of the trust are defined in the appropriate article in the will and can be created to suit your wishes. For instance, you can decide to distribute the money over a three or a thirty-year period. Funds could be distributed monthly, to create an income stream.
Incentive Trusts for Encouraging Positive Behavior
They could also be distributed only when certain benchmarks are reached, such after a full year of employment has occurred. This is known as an incentive trust.
The opposite can be true: distributions can be withheld, if the heir is engaged in behavior you want to discourage, like gambling or using drugs.
Integrating Life Insurance Proceeds with Trusts
Coordinating with Insurance Companies for Compliance
If the funding for the trust will come from proceeds from a life insurance policy, it may be necessary to have your estate planning attorney contact the insurance company to be sure that the insurance company will permit a testamentary trust to be the beneficiary of the life insurance and avoid probate altogether.
Navigating State Laws and Probate Requirements
Not all insurance companies will permit this. There may be some other changes that need to occur for this to work and be in compliance with your state’s laws. However, your estate planning attorney will be able to resolve the issue for you.
Estate Planning Attorney Benjamin Long
Benjamin Long is the founding attorney of Schlagel Long, LLC in Olathe, Kansas. He designs protective estate plans for parents who want to care for an adult child without handing over a lump sum. In the context of this article, Benjamin structures spendthrift trusts—often as testamentary trusts inside a will or as sub-trusts of a revocable living trust—that appoint a responsible trustee to manage assets and limit a beneficiary’s direct access.
Benjamin’s plans commonly include:
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Spendthrift provisions to shield assets from the child’s creditors, lawsuits, and self-inflicted risks.
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Tailored distribution standards (e.g., HEMS—health, education, maintenance, support), scheduled payouts, or incentive terms tied to employment, sobriety, or other milestones—withholdings for destructive behavior.
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Life-insurance integration, coordinating beneficiary designations so policy proceeds fund the trust (and, where permitted, avoid probate). He works with insurers to confirm they’ll pay to a testamentary or revocable-trust sub-trust and ensures the documents meet state law and company requirements.
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• Ongoing guidance on trustee selection, accounting, and updates as family circumstances change.
Benjamin earned his J.D. from Washburn University School of Law (Certificate in Advocacy; Order of the Barristers) and his B.S. from Kansas State University. Recognized as a Super Lawyers Rising Star and Martindale-Hubbell Client Distinction recipient, he is known for clear, practical drafting that protects beneficiaries while honoring a parent’s intent. Ben teaches as an adjunct at Washburn Law and coaches the Kansas State University Mock Trial Team. He lives in Olathe with his wife, Dr. Andra Long, and their two daughters.
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