My Child Won’t Be Able To Handle a Large Inheritance
We hear this statement from our clients all the time! While some people worry that their children may be too young to handle a large lump sum of money, others are concerned about leaving an inheritance to an irresponsible adult child. This is an extremely common and valid concern. Many people are not equipped to handle sudden wealth. It can potentially deter children from reaching their full potential in life as they have not had to work hard for what they have received.
So what measures can you take now to prevent your children from possibly squandering their inheritance? One very useful tool is a testamentary trust-a trust that is written directly in your will but does not go into effect until you die. Instead of receiving a large lump sum of cash, your child’s inheritance will be deposited into a trust account. You can name a family member as the trustee of the trust (the person that is legally responsible for handling the assets in the trust) or an entity such as a bank.
Many people choose to structure their testamentary trust in a way that allows the trustee to make distributions for school & medical costs at any time. If the concern is just about leaving a large lump sum of money to someone who is too young, you may choose to give full control of the trust at a specific age. If the concern is that your adult child is financially and emotionally irresponsible, you may structure the trust to only allow for distributions in specific cases.
If you are concerned about the inheritance your children will receive when you pass, it is important that you review your plan with an estate planning attorney. Working with a qualified professional will help ease your mind knowing that you are responsibly passing on the wealth you worked so hard to accumulate!