How to Handle a Spendthrift Beneficiary
- 1). Ask the trust beneficiary to provide any requests for disbursements from the trust in writing, along with any available supporting documentation.
- 2). Examine the request carefully, considering the merits of releasing the funds. Check the rules established by the grantor of the trust to determine if certain uses are pre-approved, or if there are specific limits placed on what constitutes an acceptable request. Usual requests granted include those covering medical or educational expenses.
- 3). Determine the financial affect the disbursement will have on the ability of the trust to continue. If the disbursement will lower the principal significantly so as to end the trust’s usefulness, you should consider that fact when considering the merit of the disbursement. Examine the trust papers again, looking for the grantor’s reasons behind setting up the trust, and weigh those reasons against the request.
- 4). Research the facts of the request. Make certain that the reason given for the disbursement is legitimate and that the supporting documentation proves this.
- 5). Weigh the pros and cons of the request and then decide whether to approve or disapprove. Notify the beneficiary immediately of your decision in writing.
- 6). Begin the disbursement process immediately upon approval. Make all checks from the trust payable to the disbursement party, for example, the hospital where medical expenses are due payment, or the university where the beneficiary is enrolled. If you disapprove, prepare for a possible legal challenge from the beneficiary. Keep copies of all supporting documents and dealings with the beneficiary in your own records in case you need them to support your own decision in front of a judge.
