Inheritance with Strings Attached
Let’s say your assets are substantial, and you are worried that your children will misuse the estate you worked so hard to build. Many people place restrictions on their children’s receipt of the inheritance.
Common restrictions pass the money to the adult child in stages, with some money available at age 18, with more disbursements over time. Imagine your heir running to the luxury car dealer or down the aisle with an unscrupulous partner in marriage as soon as they get their hands on the money, and you understand the concern. Some parents hold back a major portion of the inheritance until their children reach old age, thereby insuring their retirement. And some even put conditions on the inheritance, trying to avoid subsidizing lifestyles they don’t endorse or to incentivize behaviors they support.
But consider this: if you can’t influence your children as a living parent, how will your estate manage it? And if you do decide to place conditions on disbursement, be sure they are completely unambiguous. You probably don’t want the trustee making a judgement call about whether a struggling artist who is creatively engaged has achieved ‘gainful employment’ and is worthy of disbursements. What if the trustee doesn’t appreciate the art? What if the trustee would rather the money stay under his/her control, earning safe interest and generating fees for the trustee in the process?
Providing support while the heir receives an education is another common element of an estate plan. Be sure to be specific, will the estate support the heir if they are in college full time, or just if they are taking classes? Do trade schools count? Do classes in macrame at the civic center count? And how long is this allowed to continue? We heard of heirs in their thirties still in college, getting one degree after another while being supported by the estate - is this OK? Decide what makes sense for you and your children, then be very specific in your will or trust documents.
The most common advice it to allow young adults access to some of the estate right away. Let them splurge, waste, or wisely conserve the asset as a learning experience. If you want them to learn how to manage money, they need practice. And room to make errors. Providing further distributions over time allows the person receiving the inheritance to build skills and life experiences, creating the best chance for success.
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