FILTERS
Options for Addressing a Wayward Child in Your Will

Options for Addressing a Wayward Child in Your Will

  • 04.16.19
  • Planning & Retirement
  • Article

Every family has its challenges. Learn about estate planning options for addressing a beneficiary that may march to a different drummer.

Every family has a skeleton or two in the closet; a grandson with a history of substance abuse; a daughter who married someone careless with money; a ne’er-do-well brother with a string of petty crimes in his past. Maybe your family doesn’t have a skeleton, so much as a black sheep or a child who marches to a different drummer. Maybe it’s a child who struggles with mental illness, or one who simply doesn’t live up to the family’s expectations. You may disagree about any number of things – but you’re still family, and that bond runs deep.

These challenging family relationships make every day a balancing act, leaving you to find just the right mix of support and protection without enabling your loved one.

So what choices do you have when you’re struggling with family dynamics and have some estate planning decisions to make?

Option 1: Leave Them Nothing

Disinheriting someone is more common than you may think, and it’s not just among wealthy families who disapprove of a child’s lifestyle. Some families make the decision to disinherit a successful child in order to dedicate more assets to a disabled sibling or to balance out distributions if one child received more financial support during their lifetime. Those assumptions can prove risky though, as situations can change in unforeseeable ways.

Of course, you don’t always need a reason. If you don’t want to bequeath anything to anyone, you don’t have to. Many people choose to leave their assets to organizations outside the family. It’s your prerogative.

But if you disinherit someone without an explanation or understanding, expect very real feelings of hurt and betrayal, which could be enough for that person to make a claim against the estate when you’re no longer in the picture. If appropriate, explain your rationale in the will so there can be no claims of attorney drafting errors or other grounds to contest the will.

Potential litigation is just one problem that may arise. It’s likely that a family feud will erupt, even if the discord doesn’t exactly come as a surprise. It’s difficult to accept that your family has cut you off. Disinheriting someone could sow resentment that may last generations.

If you ultimately decide this is the path to take, re-evaluate that decision every so often. Situations change. Your loved one may be making strides toward a better life – and you may decide your support can help them stay on the right track.

Option 2: Leave Them Something Outright

Another option is to stipulate an outright gift for your “wild child,” perhaps something smaller than you would have in better circumstances, or make them the beneficiary of a small life insurance policy. The amount may be hard to determine – somewhere between large enough to avoid resentment and small enough to alleviate some of the worry that the gift will be squandered or potentially cause harm. Your professional advisors can help you find that fine line using the specifics of your estate and other beneficiaries involved.

Option 3: Trust in a Trust

When you want to share your wealth with those you love, but you know that outright gifts might enable them rather than help, you may want to consider a trust. If you have a legitimate need for control – such as avoiding giving a drug user carte blanche access to substantial funds – a well-structured trust may offer the flexibility you need to accomplish your estate planning goals without permanently disinheriting someone.

Certain types of trusts allow you to nominate someone to help your beneficiary manage their inheritance. There are costs involved to set up and maintain the trust, but that may seem a small price to pay for the comfort of knowing your loved one will get their inheritance under the right circumstances. Discretionary trusts, for example, leave the assets at the mercy of the trustee and your heir has no legal claim to any assets. But given the proper structure and a well-chosen trustee, the assets can be distributed with your intentions in mind.

Incentive trusts, on the other hand, formalize those intentions and make any distributions contingent on your child achieving certain goals or milestones, say successfully completing rehab or holding a job for more than a year. The point is stipulations can be built in to the trust to encourage more responsible behavior.

Trusts can also be structured to stagger distributions at intervals or certain ages to prevent the child in question from burning through their inheritance. In the meantime, you can ask the trustee to make distributions on behalf of your beneficiary to cover certain health, education and living expenses.

No matter which type of trust you select, it’s important to choose a trustee who will be objective and fair. Often, appointing a professional as the trustee makes it easier for all parties; relatives and siblings won’t get caught in the middle.

While these decisions are challenging, the good news is that comprehensive estate planning has many tools to help a loved one thrive even after you’re gone. Take the time to put in some careful thought, with guidance from professional advisors, attorneys and accountants.

Sources: marketwatch.com; nextavenue.org; theglobeandmail.com; Raymond James research; themckenziefirm.com; yourestatematters.com; thebluntbeancounter.com; cushingdolan.com; Journal of Financial Planning; bravotv.com

Raymond James and its advisors do not offer legal advice. You should discuss any legal matters with the appropriate professional.

TAG CLOUD

Important Disclosures

Saling Wealth Advisors is an SEC registered investment adviser located in Louisville, Kentucky. Saling Wealth Advisors may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Saling Wealth Advisors’ web site is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Saling Wealth Advisors’ web site on the Internet should not be construed by any consumer and/or prospective client as Saling Wealth Advisors’ solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by Saling Wealth Advisors with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Saling Wealth Advisors, please contact the state securities regulators for those states in which Saling Wealth Advisors maintains a registration filing. A copy of Saling Wealth Advisors’ current written disclosure statement discussing Saling Wealth Advisors’ business operations, services, and fees is available at the SEC’s investment adviser public information website – www.adviserinfo.sec.gov or from Saling Wealth Advisors upon written request. Saling Wealth Advisors does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Saling Wealth Advisors’ web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

This website and information are provided for guidance and information purposes only. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy. This website and information are not intended to provide investment, tax, or legal advice.