Estate Planning Options: Leaving Assets to a “Troubled Heir”

Unfortunately, children may not always make the best decisions when it comes to their health, relationships, or finances. Although you may want to help your children through difficult times even after you pass, you may be worried about how your child will use money that you leave them if you are not around to police those funds. Whether you are afraid they will use it for drugs, alcohol, gambling, or if a greedy spouse will take it, you have specific estate planning tools that you can use for just that type of situation.

Creating a Trust Tailored to Your Child’s Needs

A specially made trust that has been adjusted to meet your child’s needs will allow you to leave money to your child without worrying about how that money will be used. You can create specific types of trusts, such as a spendthrift trust, or you can simply add certain provisions to a traditional trust to limit how money can be used.

You can build in a wide variety of conditions or incentives into the trust for your child. The following are just a few examples:

  • Your child must undergo (and pass) drug or alcohol testing before the funds are released
  • The payments must go directly to landlords, schools, or healthcare providers
  • The trust money will only be dispersed when your child graduates college or keeps the same job for a certain amount of time
  • Payments from the trust account match the income that the child earns
  • The money will only be paid if the child goes through a drug or alcohol treatment program

Although you have a great deal of flexibility in creating these conditions, there are some limitations. For example, you cannot impose restrictions on your child’s ability to get married or restrict their religious freedom. Your estate planning attorney will help you avoid these issues in creating the trust.

The Role of the Trustee in Your Child’s Trust

Every trust has a trustee. This person is an independent third-party that controls how money is provided to your child or other loved one. A trustee can be a family member or friend, or it could be a financial institution or company that offers trustee services.

In situations where you are creating a trust to limit a child in some way, it may be a good idea to use a company or bank as your trustee. That way, declining to provide money to a child because of the trust document language does not strain any existing relationships.

Spendthrift Trusts

A spendthrift trust is just another name for the type of trust that has many of the limitations outlined above. It can also give the trustee discretion on when to provide funds to the trust beneficiary. For example, it can specifically state that funds can only be dispersed for living expenses or that funds can only be given in certain amounts or in specific intervals.

If you allow a trustee to determine when to provide funds, it is much more likely that you want to use someone that you know and trust to decide when giving money is appropriate.

If you are concerned about how your child will use his or her inheritance, set up a meeting with our team. We can help you consider all of your options to ensure that your child is treated fairly and in a way that will meet your goals for him or her.

Written by Legacy Planning Law Group

Legacy Planning Law Group is dedicated to working with individuals and families to help protect the assets they have built throughout their life, and make everything simpler for families who have lost a loved one. We help thoughtful people achieve the peace of mind that comes with planning their personal legacy and passing on family harmony.

Written by Legacy Planning Law Group

Legacy Planning Law Group is dedicated to working with individuals and families to help protect the assets they have built throughout their life, and make everything simpler for families who have lost a loved one. We help thoughtful people achieve the peace of mind that comes with planning their personal legacy and passing on family harmony.