Estate Planning Lawyer
As a parent, you often want to make sure that you treat your kids as equally as possible. If one child gets new sneakers, you make sure the other kids get new sneakers. If a child wants to go on a school trip out of town, you want to give the other children the same opportunity. When planning for inheritance, many parents are very adamant that all children receive the same share, no matter what, so there are no hard feelings. In most cases, that is a great plan. In certain circumstances, it would be more advisable to treat them a little bit differently.
- Spendthrift Child – If your adult child has a history of spending every last dollar, and then some, of their income and previous inheritances, you may want to think twice about giving that child too much money, too fast. The child may have a tendency to think that the money will never run out, so they go on to spend it in record time. You can always give them a certain amount, but have it be held in a trust for their benefit. Perhaps they receive a certain amount per year, like $20K per year, or 10% per year. Then at a certain age, like 65, he/she may request the balance. This allows the child to have some funds, but still have a nest egg growing in the trust for his/her retirement.
- Drug or Alcohol Addiction – With prescription drug addiction on the rise, you never know if your children have one right now, or have one in the future. If he/she receives an inheritance in full, in cash, he/she may just use most of it to increase their addiction. Generally parents are in denial that this would ever happen to their child, but unfortunately anyone can be addicted fairly quickly and easily, just by one prescription of pain medication. The best way to tackle this issue is to keep a child’s inheritance in trust, and provide the trustee some discretion to withhold distributions if they suspect an addiction. This will hopefully give them the incentive to go to recovery, and get clean.
- Mental Health – Another issue on the rise today is mental health. Many people are being diagnosed with anxiety, depression, bipolar, schizophrenia and a whole host of issues. If your child already suffers from this now, or in the future, it is important to not give the inheritance too soon or too fast, because they are more likely to be “duped.” They may decide to trust the next person who shows them love and affection, and that person encourages them to hand over the money, or they may just get access to the funds on their own. To protect your children, keep the assets in trust, with the Trustee having the discretion to distribute. Therefore, the child will have funds to keep them in their standard of living, but will not have the ability to just hand over the funds to a predator.
- Ex In-Laws – When a couple walks down the aisle, the hope is always that they live happily ever after. Unfortunately, the statistics show that more than half of marriages fail and end in divorce. Perhaps you think your children have “perfect” marriages and would never end up that way. But what if they do? Would you want potentially half or all of the money you worked hard for, in the hands of your ex-son in law or ex-daughter-in-law? Most people do not. Once again, by putting your children’s inheritances in a Trust, it will be protected from any future divorces.
All of the above issues are sensitive subjects. After you have prepared a proper estate plan with an estate planning lawyer Palatine, IL relies on, using a Living Trust, it is also advisable to write out a Statement of Intentions. This is done in your words, and in your own way, to explain the rationale on how you decided on certain terms of your trust. This statement will help the family have a better understanding, and reduce the ill-will that may occur upon your death.
Thank you to our friends and contributors at Bott & Associates for their insight into estate planning and children.