How to Protect an Immature Heir?
How to protect an immature heir is a common question we hear. Fortunately, there are some excellent ways to do so.
What are Immature Heirs?
Heirs can be regarded as immature if they are simply too young to handle an inheritance. An older person who has shown himself to lack financial discipline, is also immature. And an heir of any age who is mentally handicapped can also be regarded as immature. So, the suggestions which follow can apply to any of these types of heirs.
Protection Under a Simple Will:
Even under a Simple Will, parents can provide some measure of protection.
Idaho’s Uniform Gifts to Minors Act allows a parent to leave a managed inheritance. Such a gift will be retained by the Executor until the beneficiary reaches age 21. But the inheritance must be transferred to the heir by age 21.
Having said that, most parents are less than confident that an inheritance of a 21 year-old will be spent well.
So, under just about any definition of immaturity, this is not a good long-term solution.
Protection Under a Trust:
The better solution is available under a Family Trust or Living Trust.
In setting up such a trust, the parents can dictate the age or ages at which the inheritance is transferred to the heir. There is no limit on that age.
The transfers can also be made in stages. For example, half the inheritance can be paid at age 25 and the other half at age 30. Or a fixed amount of money can be paid to the heir each year until the inheritance is exhausted.
Another approach is to regard the inheritance as a supplemental distribution. The Executor can assess how much in other income the heir receives each year. Then make a determination of how much more is needed for a comfortable lifestyle. This approach tends to maximize the duration of the inheritance’s benefit.
For most situations, the creation of a Family Trust or a Living Trust is the best method to protect an immature heir. Using such a trust tends to maximize the duration of the benefit received by the heir.