We all have people in our lives who go through money like it is nothing; often, the money is not used for their benefit and is wasted, or if they have a drug problem, more money can cause them direct harm. If that person is your child or even your grandchild, you might want to try and maintain a little control over how they spend their inheritance.
Through the use of a Trust, you can still give money to your child while setting limits on how he receives his inheritance. For example, you can give your Trustee discretion as to when and how to give money to your child, such as paying for a house or a wedding, but not giving money to your child outright for him to use as he wishes. Or you can direct your Trustee to give a certain sum or a percentage to your child at a certain age, or annually, bi-annually, quarterly, or monthly. I often have clients who want to give one-third to their child at a certain age, one-half of the remainder at another age, and then the rest at a different age.
There are many options you can utilize through the use of a Trust that you don’t have if you were to only do a Will, or do no estate planning at all.
Apart from laying out the restrictions in your Trust document, you can also give your Trustee absolute discretion to withhold money from your child if your child is a so-called “spendthrift,” meaning the Trustee does not have to give money to your child if, for example, your child has a lot of unneeded credit card debt, is in a cult, is an addict, or is in the middle of a divorce. This is called a spendthrift provision.
There are a myriad of ways you can ensure your child does not squander his inheritance, and speaking with an estate planning attorney will assist you in determining which option is best for your situation.
Andrea Nelson is an attorney at Hamblett & Kerrigan who focuses her practice in the area of estate planning, including wills, trusts, health and financial powers of attorney, as well as trust and estate administration. Attorney Nelson can be reached at [email protected].