As you craft your estate plan, you can't help worrying about ways that your heirs are going to waste your money. The risk feels too real when you start designating assets you've worked to save up for decades, and you think about how someone else may not respect the time and effort that took.
For example, here are a few of the most common ways that millennials tend to waste their own money:
- Going out to eat: 72.36 percent
- Throwing away food that did not get eaten: 31.71 percent
- Drinking alcohol: 27.36 percent
- Paying for various forms of entertainment: 26.50 percent
- Credit cards: 17.36 percent
It's not just millennials. All recent generations cite eating out as the top way that they throw away their money. Most of them complain about entertainment costs, like the cable bill. Anyone, at any age, can get into serious credit card debt and even wind up declaring bankruptcy.
So, what can you do to protect your money from their wasteful spending habits? One tactic is to use a trust. It can then put limits on how the money can be used.
For instance, an educational trust can set that money aside for college tuition, rather than alcohol and eating out. An age-based trust can specify that your heirs do not actually get the money until they get older, with the hope that someone in their 30s will make better choices than a college student.
There are a lot of options when it comes to trusts. You must know what they are and how you can use them to benefit your heirs and create a solid estate plan.