THE "SPENDTHRIFT TRUST"... OR ... "SAFETY-NET TRUST"

In the present state of the American social scene, there are many people who have trouble in the proper care of their resources, particularly their cash resources. In addition to the more traditional problem of people whose money "just goes through their fingers," we have untold numbers of people who suffer from mental stress and disease ... and we have millions who are addicted to alcohol and drugs.

If you have any of these kinds of people in your family, you certainly do not want to give or to leave them substantial sums of money outright. Rather, you need to design some mechanism whereby they may receive a stream of income.

There are two theories of inheritance. One is the "Safety Net" theory ... and one is the "Bonanza" theory. Unfortunately, most bequests follow the bonanza theory. When the parent dies, the child receives a bonanza. And many people are unqualified to properly manage a bonanza.

To assure that your heirs do not receive a bonanza, you have several options, the most useful of which is one that has traditionally been called the "Spendthrift Trust."

To create such a trust, you discuss the matter with your lawyer and decide on the criteria that you might want in such a trust. You might, for example, choose a bank or stockbrokerage trust department as your trustee and instruct that trustee to benefit your children or grandchildren (or both) in these ways:

1. Pay their health insurance premium. 2. Pay their disability insurance premium. 3. Pay any legitimate educational costs. 4 . Give them all (or part) of the income generated.

With such an approach, you have protected the corpus, or body, of money from being wasted. You have also noted that your values guide the disbursement of your money.

By creating this trust for the benefit of two or three generations ... you might be able to adequately educate many people and to protect all of them from the vicissitudes of life such as poor health or disability.

Some planners create this type of trust and carry it on for many years. At the close of the trust, they give some to heirs and some to charity.

To leave some of the funds to our cause, you might include "The Foundation" as a "principal" beneficiary of the trust. This means that a certain percentage of the principal goes to "The Foundation" after providing for health and education for one or more generations of your family members.