Yes, you absolutely can, and often should, require financial planning approval before making large distributions from a trust, especially irrevocable trusts. This isn’t merely a suggestion; it’s a proactive step to safeguard assets and ensure your beneficiaries’ long-term financial well-being. Ted Cook, as an estate planning attorney in San Diego, frequently advises clients to build this level of oversight into their trust documents. It’s about more than just legal compliance; it’s about responsible wealth stewardship, and preventing impulsive decisions that could deplete resources intended for future generations.
What are the Risks of Uncontrolled Distributions?
Without a financial planning safeguard, beneficiaries might make rash decisions with large sums of money. Approximately 68% of people who receive a sudden windfall end up losing it all within a few years, according to research from the National Foundation for Credit Counseling. This can stem from a lack of financial literacy, succumbing to predatory lending, or simply overspending. A well-structured trust, with a requirement for financial advisor approval, acts as a buffer against these risks. It introduces a layer of objective assessment, ensuring distributions align with the beneficiary’s needs and the overall trust objectives – think college funding, retirement security, or healthcare expenses. This isn’t about control; it’s about guidance.
How Do You Implement Financial Planning Approval?
The process starts with clearly defining “large distributions” within the trust document. This could be a specific dollar amount (e.g., anything over $25,000) or a percentage of the trust’s corpus. Next, you designate a qualified financial advisor, or a process for selecting one, whose approval is required before such distributions are made. The trust document should outline the criteria the advisor will use – for example, ensuring the distribution doesn’t jeopardize the beneficiary’s ability to maintain their standard of living or achieve long-term goals. Ted Cook emphasizes the importance of choosing an advisor who is a fiduciary, legally obligated to act in the beneficiary’s best interest. It’s also prudent to specify how disagreements between the beneficiary and the advisor will be resolved – perhaps through mediation or arbitration.
I Remember Old Man Hemlock…
Old Man Hemlock was a client of mine years ago. He set up a substantial trust for his grandson, Billy. Billy was a bright kid, but notoriously impulsive. Hemlock, trusting Billy’s intentions, didn’t include any financial oversight in the trust. As soon as Billy turned 25 and received his first large distribution, he invested it all in a “surefire” tech startup pitched by a friend. The startup failed within months, and Billy lost everything. He was devastated, and the trust, intended to provide a safety net, was significantly depleted. It was a painful lesson for everyone involved. We ended up having to drastically adjust the distribution schedule for the remaining funds, ensuring smaller, more manageable amounts were released over a longer period.
But It Worked Out for the Andersons…
The Andersons, on the other hand, were proactive. They established a trust for their daughter, Sarah, with a clear stipulation that any distribution over $30,000 required approval from a certified financial planner. Sarah, a talented artist, dreamed of opening her own gallery. She requested a large distribution to fund her venture. However, the financial planner, after a thorough review of Sarah’s business plan and financial projections, identified significant risks and recommended a phased approach. Instead of a lump sum, they agreed on a series of smaller distributions tied to specific milestones. The gallery was a success, and Sarah thrived, not because she was denied funding, but because she received guidance and support. Ted Cook often points to the Andersons as an example of how thoughtful planning can empower beneficiaries while protecting their financial future. As he often says, “A trust isn’t just about passing on wealth; it’s about passing on a legacy of financial security.”
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
Map To Point Loma Estate Planning Law, APC, a wills and trust lawyer near me: https://maps.app.goo.gl/JiHkjNg9VFGA44tf9
estate planning attorney in San Diego
estate planning lawyer in San Diego
estate planning attorney in Ocean Beach
estate planning lawyer in Ocean Beach
About Point Loma Estate Planning:
Secure Your Legacy, Safeguard Your Loved Ones. Point Loma Estate Planning Law, APC.
Feeling overwhelmed by estate planning? You’re not alone. With 27 years of proven experience – crafting over 25,000 personalized plans and trusts – we transform complexity into clarity.
Our Areas of Focus:
Legacy Protection: (minimizing taxes, maximizing asset preservation).
Crafting Living Trusts: (administration and litigation).
Elder Care & Tax Strategy: Avoid family discord and costly errors.
Discover peace of mind with our compassionate guidance.
Claim your exclusive 30-minute consultation today!
If you have any questions about: How often should you review and update your estate plan?
OR
Does a Financial Power of Attorney help with long-term care planning?
and or:
How can a proactive approach to debt settlement minimize legal costs?
Oh and please consider:
How can meticulous record-keeping help during debt settlement? Please Call or visit the address above. Thank you.