by Steve Spewak, JD (

When you’ve worked hard to leave a financial legacy for your children, it’s hard to imagine your heirs squandering that legacy after you pass away. But situations like this routinely occur. Sometimes children will use their inheritance to satisfy debts owed to creditors or will be less than responsible with the money you worked hard to acquire.

So after your death, how do you keep your family assets intact while providing income for your children for years to come? To answer that question, here are some estate planning strategies to consider.

Spendthrift Trust

Instead of leaving an outright inheritance to an heir with bad financial habits, you may want to create a spendthrift trust. A spendthrift trust places restrictions on a child’s inheritance by only giving the heir a monthly allowance or lump sum payments at specific points in time. Outside of the regular disbursement schedule, parents also can use a spendthrift trust to set aside money for particular purposes such as education or medical expenses.

The key to making a spendthrift trust work is hiring the right trustee. The trustee manages the funds and the disbursements, so it is important to hire someone who can make decisions independent of the heir’s influence.


Incentive Trust

An incentive trust is another way to manage the inheritance of a child with bad financial habits. An incentive trust controls a beneficiary’s withdrawals by making payments contingent on good behavior. These behaviors include going to college, getting a job, completing a rehabilitation program, or staying drug-free. Like the spendthrift trust, the benefits of the incentive trust rely heavily on the trustee. So parents may want to hire a professional trustee to enforce the disbursement conditions instead of appointing a friend or family member.


If you are having trouble finding the right person to serve as a trustee for your heir, an annuity is another option to consider. An annuity is a contract between the buyer and an insurance company. You pay the insurer upfront, and in return, the insurer guarantees that the beneficiary will receive regular monthly payments for a specified period or life. The only drawback to an annuity is that your heir may be able to sell it on the secondary market for a lump sum. To combat this, you can place the annuity in a trust managed by a trustee as well.

If you need help protecting your financial legacy, Aegis Law can help you create an estate plan that makes sense. Send us a message or call us at (314) 454-9100 today.