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Gierach and Gierach, P.A Gierach and Gierach
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When Your Beneficiaries May Need Protection from Themselves


We’ve previously discussed the most important mistakes to avoid when it comes to naming beneficiaries who will inherit various assets, such as your 401(k), IRA, life insurance policy, a trust, etc. While there are “special needs” beneficiaries in terms of those who must stay under or within a certain income and/or asset level in order to qualify for particular government programs, there are also beneficiaries who need protection for one reason or another; sometimes from themselves.

This can include individuals with addiction issues and/or those who are poor money managers. By leaving assets outright to beneficiaries who face particular challenges like these, you not only risk a quick loss, but you could be placing the beneficiary themselves in danger if they can then use those assets to fund their addiction. In addition, sometimes the concern isn’t the beneficiary themselves, but perhaps their spouse or partner, who could be wielding a significant amount of control over them, and thus any outright bequest could end up leaving you uncomfortable that your beneficiary may not actually receive the assets that you leave them.

Two common options that individuals in these circumstances sometimes pursue are annuities and ongoing trusts, both of which provide long-term income options, while also allowing you to provide a monthly income after you pass. Below, we discuss the pros and cons of each:

The Annuity Option

An annuity allows you to set up a regular, supplementary income for the beneficiary without allowing for discretionary spending. However, the funds still go directly to the beneficiary and not through anyone else (such as a trustee) first.

The Ongoing Trust Option

An ongoing trust might be a better option for a beneficiary with an addiction issue because a trustee pays expenses out directly (for example, paying bills) rather than providing the funds directly to the beneficiary. This might also be a better option for someone who is receiving any government/income-based benefits, as any monthly income that one receives directly through an annuity could affect their ability to continue to receive those benefits if it raises their income/asset level and thus disqualifies them from the program.

What an Estate Planning Attorney Can Provide for You: Contact Us to Find Out 

Regardless of the circumstance, these issues can present deeply emotional questions and challenges for parents and other relatives, who are sometimes divided over what to do in terms of what is in the best interest of the beneficiary after their death. An attorney can discuss various options you might have, as well as other clients in similar situations have pursued and the pros and cons of each option, but of course cannot ultimately make the decision for you as it is ultimately your personal decision.

If you live in Florida, know that our estate planning attorneys are here to help. Our Orlando estate planning attorneys have been helping clients and their families plan for the future for decades, and we are prepared to help you in whatever capacity we can. Contact the office of Gierach and Gierach, P.A. to find out more.



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