How to Provide for Immature Heirs.

by | Feb 14, 2019 | Uncategorized | 0 comments

What can one do for heirs that lack the financial maturity to handle an inheritance? A Family Trust is always a good option.

Children often do not get their financial bearings until their late 20’s or early 30’s. So leaving a sizable inheritance to a younger heir in a Simple Will can have serious negative effects.

It can cause the inheritance to be squandered. Or worse yet, it can trigger the development of terrible spending habits in the heir that will plague them for the rest of their lives.

But utilizing a Family Trust can be the perfect tool for dealing with these risks. Here’s a quick summary of how that would work.

Mom and Dad create a Family Trust. Mom and Dad own the trust and can modify it as often as they like as long as they are alive.

When both Mom and Dad have passed away, then the trust is divided among the heirs in the shares that Mom and Dad have specified. But the share of any such heir who is under 30 years of age is retained in the trust until that heir reaches that age.

But while the heir is continuing to grow up, the funds in that child’s share can be used to help raise and educate him or her.

Then, when the heir reaches certain designated ages, the inheritance can be parceled out to the heir. For example, Mom and Dad could specify that when the child is 22 years old, he or she can receive 10% of the inheritance. Then at 26 years old, perhaps an additional 20% of the remaining inheritance can be paid to them. Finally, at age 30, the remainder of the inheritance is paid out to the child.

Two important things happen under this plan. First, the financial needs of the child (including the costs of education) are taken care of out of the trust. Second, the child gets to learn to deal with the inheritance using the smaller early disbursements to come to understand how easy it can be to squander the precious inheritance. Then, when the child finally reaches age 30, the chances of the inheritance being handled well increases substantially.

So, for these reasons, parents of young or immature heirs will very often set up a Family Trust to make this entire process successful.

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Daniel Patchin

Benjamin Monaghan, Attorney

Benjamin Monaghan