Children. The moment you receive your bundle of joy, your aim is to guard the child from anything that puts them at risk. We also seek to ensure our kids are ok long after we are gone.
But not all children are responsible with money.
Many kids grow up to become irresponsible with the wealth of their parents. They sit back and spend the money that you have worked hard for, leaving you with no choice but to take things the way they are. Some parents disinherit their kids so that they learn a lesson.
But for most parents, this is not a decision they can make. This is why many parents make the wise step of seeking advice from a skilled estate planning lawyer.
One aim of seeking wise counsel is to understand what to do with the reckless child. Should they be included the will or should they be disinherited? True to their words, the lawyer usually assesses the situation and gives the way forward as expected. Good thing is you have various options to take when your kid is irresponsible.
Money Skills
Money management skills don’t come naturally to our kids, which is why it is prudent to get a way to control the wasteful nature of your children rather than leave them out of your plans.
When considering how your estate will be allocated upon you demise, it is good for you to assess the responsibility of your kids, which will help make an effective choice and create a lasting solution towards succession.
It’s a well-known fact that developing the right money management skill isn’t easy, and it is something that can take a lifetime. You might find one kid has a strength in investing and a weakness in spending, and the vice versa is true. Either way, you need to find a solution to the issue.
Financial maturity is a skill that needs some time and effort. This is why those people that win lotteries amounting to millions of dollars end up broke after just a few years of spending sprees and bad investment decisions.
A Will vs. a Trust
When you have an irresponsible child, you are torn between writing a will or coming up with a trust. A will tells the facilitator to allocate a definite fraction of the estate to the kid, without any conditions attached. On the other hand, a trust allows the executor to exercise more control over the way the kid spends the wealth. This is because there is someone to manage the estate for the child.
You can make this decision easily by involving a trusted estate planning attorney right from the start.
Let us look at the different structures you have access to as per prevailing situation:
Annuities
An annuity is a fixed amount of money that is paid out to someone every year, for the rest of their life. When you opt for this structure, your beneficiary will receive a fixed income monthly, quarterly or annually.
You can set the sum of the annuity to be a proportion of your estate or all of it subject to the number of beneficiaries. When you decide to go for annuities, your beneficiary will receive the funds without losing any to taxes or probate lawyers.
Incentive Trust
This doles out assets to the heir depending on performance. The child has to meet certain conditions so as to earn the distributions.
Some conditions include:- Testing for drugs and alcohol prior to funds getting released.
- Paying the amount straight to schools or property-owners rather than paying straight to the beneficiary.
- Payout of a lump sum if the heir graduates from a learning institution or retains a job for a certain period.
- Payment to a drug rehab center only if the child stays drug free for a certain period of time.
- Payments to match what the child earns.
If you intend to come up with this intricate type of trust, enlist the services of a qualified estate planning lawyer to help you come up with a plan that achieves what you wish for your child.
Age-based Trust
If your child is underage and behaving badly, it is prudent that you decide the distributions centered on the age. However, you need to understand that age won’t dictate the way the child behaves.
Conclusion
Remember that your child is your obligation; therefore you need to come up with the best decisions towards his life. Work with the right estate planning attorney to come up with the best estate plan that encompasses your child, however irresponsible he is.
