Surprising Options Parents Have Over How Their Children Can Inherit | Estate Plan Pros
To give them the money, or not give them the money, that is the question most parents ask themselves.  But few people are aware that a competent estate planning attorney can open a world of options.  On the other hand, giving money directly to beneficiaries can leave them a world of problems.

Young Beneficiaries

Few people are prepared to handle a sudden influx of a large pile of cash, let alone a 18 or 19 year old, or even some 25 year olds. For those with grown children, think about what would happen if your child predeceased you, and your grandchildren received their parents share?  Would they be able to handle the money, or know how to make the most of it?  Or would they go on a spending spree?  They’re going to end up flipping burgers instead of getting their education.  So what we do for a lot of our clients is a staged distribution, where the children don’t get a third or a half of the money until they’ve turned 25 or have received their college degree.  The rest can be parceled out as the child gets older, or achieves other milestones, like a master’s degree.

Lack of Financial Sense

Some children, as adults seem not to have grown up.  Their money handling skills are terrible, and you just know that giving them an inheritance will mean they will quit their job and live off the money until it’s all gone.  Or they may have drug or alcohol problems.  For these individuals, they should not, and in some cases cannot handle the money.  In this case, we would set the trust up to let the trustee step into your shoes, and have the trustee distribute the money to the individual over their lifetime, just like you would.

Special Needs

Disabled children often rely on government services that are means-based.  In other words the assistance that they are relying on could go completely away if they received even a modest inheritance, leaving them worse off than if they had received no inheritance at all.  For these individuals we create Special Needs Trusts, carefully drafted to protect their benefits.

Third Parties

What about people outside the trust, people like divorcing spouses or creditors, or people suing your beneficiary?  When your children inherit directly, they receive no protection against these kinds of outside attacks.  More people lose their inheritance to creditors, divorcing spouses, and lawsuits, than probate and estate tax and conservatorship combined. Our answer to this problem is called the personal asset trust, one of the unique features to trust planning that we offer.  Instead of directly inheriting your property, you wrap their inheritance in a trust wrapper called a personal asset trust.  It’s like their own personal vault.  Even better, you, and your successor trustee can determine what kind of protective level to put on it.  Your beneficiary can manage and control the inheritance and have access to it. For more information about this and any of the other options I discussed, you may schedule a personal consultation with me by contacting our office.

Tags:Children Creditor Protection Special Needs

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Erik Hartstrom

Erik is the founder of Estate Plan Pros, a leading estate planning practice in Elk Grove.  Erik’s practice focuses on Estate Planning Law. In Estate Planning, Erik works with clients to make the process simple, so clients can focus on more important things. He is a local authority for specialized estate planning instruments, like Special Needs Trust, Irrevocable Trusts, or other focused documents. Erik has litigated, negotiated, and mediated the gamut of family law cases. With this unique perspective as a family law and estate attorney he can often spot issues otherwise overlooked. Prior to graduating he worked as a legislative analyst for a non-profit organization, and volunteered as a youth counselor. Erik currently participates in local politics and is an active member of his local church. Erik is very happily married and has two young sons. Together, his family loves to get outdoors and enjoy the varied activities the Sacramento region has to offer.


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