SHOULD YOU PUT YOUR ADULT CHILD’S INHERITANCE INTO A TRUST?

            Whether you should add a trust to your will to manage your adult child’s inheritance is one of the questions you should review when you are doing your estate planning.  This article will help you think through the issues to consider, starting with the most obvious.

Disabled Child.  If your child is disabled, you should run—not walk—to an attorney familiar with disability issues.  The attorney will help you put a "special needs” trust in your will.  The special needs trust will keep the assets you leave your child from disqualifying him or her from receiving any government benefits he or she may be entitled to receive.

Drugs/Alcohol/Gambling.  Any inheritance you leave outright to a child with an addiction problem will most likely be used to fuel the addiction.  If, instead, you leave your child’s inheritance in a trust, doing so will permit the trustee to use the money for your child’s basic needs and not his destructive behavior.

Spenders.  A large number of honest, bright people with big hearts and many other good qualities cannot put off today’s gratification for tomorrow’s goal.  They are never able to save for a rainy day and are often short at the end of the month.  If they receive a large sum of money, it will be spent almost immediately.   Many parents in this situation use a trust so a trustee can conserve the principal of the child’s inheritance and pay the child the income.  That way when the child has a true life emergency, the inheritance will be there and the trustee can meet the child’s needs.

Everyone Else.  Even if your child has managed to avoid the above pitfalls of life, you may want to consider a trust to hold his or her inheritance.  Putting a child’s inheritance in trust will make it less likely that your child will lose the inheritance if he or she gets divorced.  It will also protect the inheritance from your child’s creditors if your child loses a job or has some other unanticipated financial setback.  The trustee will manage the principal of the inheritance, distribute the income to your child and be able to apply the principal to your child’s serious needs.  Also, leaving your child’s inheritance in trust makes it more likely that something will be left from the inheritance to go to your grandchildren.

I have been helping Clark County residents with their estate planning and probate needs since 1976. I give frequent seminars in the community to help increase understanding of estate planning issues. My practice emphasizes probate, Medicaid issues, wills, trusts, incapacity issues, guardianships and durable powers of attorney. Phone: (360) 816-2485 Fax: (360) 816-2486