Q: We have a grown daughter who has a gambling problem. We want to provide for her in our will, but also want to protect her share from being wasted after we die. How can we do this?
A: Your situation is not unusual. Most of us know at least one person who has difficulty handling money for one reason or another. Many people I have helped with estate planning over the years have had at least one beneficiary who just couldn’t manage his affairs. Drug and alcohol addiction long have been factors to consider in estate planning. Problematic gambling seems to be gaining ground as an even more common issue.
Addictive behavior, though, is not the only reason to make special provision to safeguard an heir’s inheritance. A grown child with a problematic spouse may make it necessary to protect the child’s share. Children with mental or physical disabilities may require help managing their money to best meet their needs over many years. And those of us with minor children may want to dole funds out to them in stages as they age in order to make sure their long-term needs are met.
A will is the most common estate planning tool. But it is generally insufficient to protect an heir from himself or his situation. When you pass your property by will, your child gets the property in one lump sum. If you are concerned that a particular child will not be able to handle the money — for whatever reason — you must look beyond a simple will to a more appropriate mechanism.
Your concerns are best addressed with a trust. In a trust, you can leave a child her share, but leave the control of that share with a person you know will look out for her best interests. That person — the trustee — will have possession and control of the child’s inheritance, and will be able to ensure it is used for her benefit, according to your instructions. You can leave each of your children equal (or unequal) shares, but provide that their shares are to be managed differently. One child might receive her share free of trust immediately upon your death, while another child’s share could be held in trust and administered for her benefit. In a trust, the options are virtually limitless, and you can customize your estate plan to account for the varied needs of your heirs.
MATT HOPKINS is an attorney for Lester, Loving & Davies P.C. More information is available at lldlaw.com. Send questions to email@example.com.