Money and immaturity can be a dangerous combination.
You know who you want to have your assets if you die.
There is one problem.
Not all of your beneficiaries could not handle their inheritances should you die today.
According to a recent Kiplinger article titled “Is Your Beneficiary Ready to Receive Money?,” this situation if fairly common.
If your beneficiary is a minor, he or she will be unable to sign legal contracts.
If there are no plans, the court will take custody of the inheritance until your minor child becomes a legal adult.
At this time, the court must turn over the inheritance ... lock, stock, and barrel.
Do you want your child to have full, unrestricted control over what represents your life's work at age 18?
What if your beneficiary is older but irresponsible.
He or she makes poor choices with drugs or gambling.
Maybe an abusive spouse or looming divorce is the issue.
Perhaps he or she could lose your inheritance through mismanagement or lawsuit.
An outright inheritance could also be an issue if your beneficiary has a disability but is perfectly capable of handling money.
An inheritance could disqualify your loved one from government benefits.
What do you do in these situations?
Work with an experienced estate planning attorney.
He or she can create a "trust" specifically tailored to the unique needs of your beneficiary.
For example, depending on whether your child is a responsible or irresponsible adult, then a long-term discretionary "spendthrift" trust can protect the inheritance "for" or "from" him or her.
With any trust, you will need a trustee to manage the trust.
If the trust is large or you have a more complex situation, such as a drug addicted beneficiary or a beneficiary with special needs, then a professional trust company may need to be engaged.
The trustee, as a fiduciary, is required to act in the best interests of the trust and only allow disbursements according to the guidelines stipulated in the trust.
Like all estate planning, you cannot do it once and forget it forever.
You should review your estate plan every few years or after major life changes to ensure it still meets your specific goals and circumstances.
Reference: Kiplinger (April 1, 2019) “Is Your Beneficiary Ready to Receive Money?”