FAST FACTS
- 55% of adults do not have an estate plan in place.
- More than 90% of people who create wills are over the age of 60.
- Even a simple estate plan may spend up to six months in probate.
It can be quite difficult for a parent to create an estate plan or will in the best circumstances, let alone when they have a child who mismanages money. A parent who deals with a child who can’t seem to do anything but throw money away may be leary of leaving them a lump sum or property upon their passing.
The parent may be concerned that their child will not be taken care of due to the child’s propensity to be wasteful or thoughtless when it comes to finances. What can a parent do?
Statistically, most of us are middle-class people who only want to ensure that our children are given enough to be taken care of and don’t squander their inheritance. You’ve worked hard for your money and property, no matter how much or little you have.
The thought of your child spending it on frivolous items, allowing their spouse to control the money or making poor financial decisions is heartbreaking. Some people will decide to not leave their children a dime, while others leave children everything under the assumption they won’t have any control of their child’s spending.
That couldn’t be further from the truth. There are options if you are worried about your children wasting what they are given upon your passing.
Not Leaving Anything At All
This is an option, of course, but is fairly extreme. While some parents will not choose to completely cut their children out of their will or estate plan, it may be the only option for others.
If this is your choice, don’t make the mistake of assuming that if you don’t leave your child anything that they won’t get anything. You must spell it out in your will.
You only need to say that you have intentionally chosen to leave your child, or children, nothing. Otherwise, state law may kick in and assume that they were simply overlooked and provide them with what is deemed to be their share.
Attach Conditions
In simpler terms, this means attaching strings to the money. If you don’t feel confident that your child will use the money as you intend, you can put someone else in charge of deciding how and when the money will be spent. An easy way to do this is to put the money in a trust. The not so easy part of this is deciding who you will name as a trustee.
When deciding who will act as trustee, know that this person will be responsible for making decisions about how the trust is used to benefit your child. You can certainly outline some guidelines, but they will have the ultimate say. It’s a large responsibility that you are asking a person to take on, and you have to make sure it’s someone you trust.
When setting up a trust for your child, you can certainly say how long it will last. You may decide that the trust is in effect for a certain number of years, after which your child will be given full control over the money.
You can also leave the decision up to the person you name as trustee. If you give them this power, they will decide when your child can be trusted with what you have left and no longer needs someone to manage it for them.
Setting Up Installments
One of the easier ways to control what your child inherits and when is to leave a trust that doles out money to your child in installments instead of a will that leaves them a lump sum or the totality of your assets. You may cut your money into quarters, for example. Your child will get 25% when they turn 21, another 25% when they turn 30, and so on. You may also set it up so your child is given a specific amount of money each year.
This option requires that you set up a trustee, but the responsibility is less than if you had placed the money in a trust and given the trustee full discretion. In this instance, they won’t have to make decisions about how the money is spent, only that it’s distributed as intended.
You may choose to buy an annuity instead of setting up a trust. Your Atlanta estate planning attorney can help you determine which option is the most suitable for your unique situation.
Incentive and Dynasty Trusts
An incentive trust will only provide money to your child for certain behaviors or for specific reasons. For example, payments may be triggered if your child goes to college. You may make the payments contingent upon your child completing a rehab program. There are a variety of ways you can set up an incentive trust.
A dynasty trust is one that lasts forever or for as long as your assets last. These types of trusts can protect your money from creditors and more. A dynasty trust can also help your child avoid some of the taxes associated with an inheritance.
An Atlanta Estate Planning Attorney Can Help
Leaving money to a child you aren’t sure is going to manage it properly is a big decision. You may choose to leave them nothing at all or leave them money with strings attached. An estate planning attorney can help you make the best financial decisions for your family.
Reach out to Fouts Law Group today to schedule a consultation and discover how we can assist you.
