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What if I don’t trust my kids to get an inheritance before they’re ready?

Most of us would like what we’ve worked hard for all of our lives to continue to provide for our families for a long time, even after we pass. We’d like it if that money didn’t go straight to creditors or get spent on things that are frivolous.

As such, it’s normal if you have reservations about the possibility of bequeathing your entire estate to those who you feel may not yet be financially responsible enough. But what can you do if you have children who, should you pass tomorrow, would be far too young and inexperienced to receive an inheritance?

One of the best tools used to plan for this is a testamentary trust or minor beneficiary trust. These trusts are generally created in your will to place an inheritance aside for minor children and children or other beneficiaries who you don’t believe are financially responsible enough to receive an inheritance just yet. By putting your assets into a trust, you can ensure that those assets will provide support for your family for as long as possible. Here are some points to consider when setting up a trust for this purpose:

When should I give my kids access to their inheritance?

The most common use of the testamentary trust or minor beneficiary trust is to set age restrictions on when assets can be distributed and how much is distributed at a time. There are two types of age restrictions that are commonly used.

One option is to set a specific age when the entire amount remaining in the trust will be disbursed at once. For example, all assets of the trust are distributed once the beneficiary turns 25 years old.

The other option is to stagger disbursements of the trust over several ages. For example, the first 30% could be disbursed upon the beneficiary turning 25, the second 30% when they are 30 and the remaining 40% when the beneficiary turns 35. This is only one example. Payout amounts can be disbursed as you see fit and dates or ages tailored to fit your specific wishes.

What if I want to make sure the money gets used for a certain purpose?

A lot of people want to make sure that assets placed in a trust are used for a specific purpose. The two most common purposes are for the care and support of the beneficiary or for educational expenses of a beneficiary. You can restrict educational expenses by amount, length of time, type of expense, type of institution, or level of education. For instance, you could provide so much per year per beneficiary for up to four years of higher education. You can both maintain control and ensure that as many people benefit as possible.

What if I am concerned about substance abuse?

Many people worry about what to do when a beneficiary struggles with substance abuse. Not only do many people want to prevent the beneficiary from using an inheritance for substances, but we want to make sure that the inheritance is protected from creditors. Substance abuse and creditor issues oftentimes go hand in hand. You can require your beneficiary to meet certain requirements before allowing trust assets to be disbursed. If you are concerned about potential substance abuse issues, you can require clean drug screenings before disbursements are made. These screenings can be monthly or required over the course of a specified period of time – even a year or more – before any disbursement is made.

If you want to make sure your assets continue supporting your family for as long as possible after your passing, we are able to help. Consulting with an experienced and skilled estate planning attorney can help you make sure that assets are used for what you want them to be used for and ensure that those assets are around for the long run.