So you’ve finally decided to do your estate plan and you decide to leave everything to your only son, now 15-years old. There is only one problem: your son is not financially proficient, and you are worried he may not be able to handle all of the money and property that is being left to him. In fact, you believe he would blow through his inheritance in less than 5 years. So how do you handle such a situation?
Believe it or not, this is one of the most frequent estate planning issues faced by my clients. Parents generally want to leave their property to their children to pass at death, but they’re afraid that their children won’t manage their inheritance responsibly. In your estate plan, however, you could leave your child money in a trust, and appoint a trusted friend, or a bank, or a financial company to serve as Trustee. The money could be for his benefit, but it would not be invested or distributed by him. That kind of trust could last for his entire lifetime, and, since it would be held in an irrevocable trust, would not be available to his creditors or to his spouse (if he got married). If you hold it in a lifetime trust, though, you should name an institution as Trustee, since your son would likely outlive a trusted friend of your generation. Another option would be to direct your Trustee to purchase an annuity for your son, that would guarantee a level payout over his lifetime. This is a good option sometimes, but if your son had an emergency need, such as medical care, an annuity wouldn’t be flexible enough to address that need.
To learn more about how you can leave assets to your children at death, please contact us today.