New York parents concerned about whether their adult children can handle the responsibilities associated with major inheritances may consider using trusts. One mistake that parents often make with estate plans is bequeathing their wealth outright to adult children who lack financial wisdom.
The benefit of using a trust for adult children with no financial sense is that parents can create rules to govern the distribution of the trust assets. For example, annual distributions can be limited to a fraction of the trust’s value or consist of just investment income. Parents also have the option of granting the trustee the authority to determine how and when the distributions should take place.
If one’s adult children have particularly excessive spending habits, it can be stipulated that the trustee should pay the providers of expenses related to the beneficiaries’ essential living in lieu of distributing property or money directly to the beneficiaries. Parents can tailor the provisions of the trust to suit the situation.
Trusts can also be created in a manner that allows the trustee to stop issuing distributions if it suits the best interests of the beneficiary. Examples could include when the adult child is addicted to drugs or engages in uncontrollable gambling. If the beneficiary’s needs are best suited by receiving the distributions again, the trustee can resume the distributions.
Another benefit of using a trust is that it protects the assets from creditors. A majority of states prevent creditors from forcing a trust to issue a distribution for collections.
An estate planning attorney may advise parents about which safeguards can be established to protect their wealth after they die. Estate holders could learn how trusts can be used protect inheritances from irresponsible adult children or creditors of beneficiaries.