What If My Beneficiary Isn’t Ready to Handle an Inheritance?

Beneficiary Inheritance
Can your beneficiaries handle their inheritance?

A recent Kiplinger article asks: “Is Your Beneficiary Ready to Receive Money?” In fact, not everyone will be mentally or emotionally prepared for the money you wish to leave them. Here are some things to consider when determining if your beneficiary can handle an inheritance:

The Beneficiary’s Age. Children under 18 years old cannot sign legal contracts. Without some planning, the court will take custody of the funds on the child’s behalf. This could occur via custody accounts, protective orders or conservatorships. If this happens, there’s little control over how the money will be used. The conservatorship will usually end and the funds be paid to the child, when they become an adult. Giving significant financial resources to a young adult who’s not ready for the responsibility, often ends in disaster. Work with one of our estate planning attorneys to find a solution to avoid this result.

The Beneficiary’s Lifestyle. There are many other circumstances for which you need to consider and plan. These include the following:

  • A beneficiary with a substance abuse or gambling problem;
  • A beneficiary and her inheritance winds up in an abusive relationship;
  • A beneficiary is sued;
  • A beneficiary is going through a divorce;
  • A beneficiary has a disability; and
  • A beneficiary who’s unable to manage assets.

All of these issues can be addressed, with the aid of our estate planning attorneys. A testamentary trust can be created to make certain that minors (and adults who just may not be ready) don’t get money too soon, while also making sure they have funds available to help with school, health care and life expenses.

Who Will Manage the Trust? Every trust must have a trustee. Find a person who is willing to do the work. You can also engage a professional trust company for larger trusts. The trustee will distribute funds, only in the ways you’ve instructed. Conditions can include getting an education, or using the money for a home or for substance abuse rehab.

Estate Plan Review. Review your estate plan after major life events or every few years. Talk to our qualified estate planning attorneys to make the process easier and to be certain that your money goes to the right people at the right time.

If you have any reservations about who you have in mind when writing your will, whether you’re thinking about a young child or even an older person who could be vulnerable to scams, a trust could make a lot of sense. Our experienced estate planning attorneys can help you determine the best way to make sure your beneficiaries are wise with their inheritance. Submit our online form to request a consultation.

Reference: Kiplinger (April 1, 2019) “Is Your Beneficiary Ready to Receive Money?”