Using Estate Planning To Protect Your Child And Their Inheritance

If you are leaving your child some assets or money in your estate plans, you should consider that the child might not be as careful with the assets as you have been. Some children, despite careful upbringing, just don't have the same financial sense and habits as their parents. Below are a few tips you can use to protect such a child so that their errant actions don't exhaust the inheritance within a short time.

Let the Trustee Decide

You don't have to give your assets to your child directly. In fact, the child doesn't even have to play a role in the disbursement and use of the money. You can set up a trust fund with a trustworthy trustee to handle all these things. The trustee will decide how the money is to be used or even when to release funds to the child. For example, the trustee can release some funds every school year so that the child can have enough money for their education.

Offer Incentives

Another way is to set conditions that the child must meet to receive the assets. For example, if your child is abusing drugs, you can set up a trust so that the child only receives the money if they stay sober for a given number of years. Other common incentives include:

• Not selling a business for a specified period
• Completing college
• Maintaining a job

Come up with incentives that are measurable, can help the child, and are realistic. You will need a trustee to ensure that the child accomplishes the conditions before they are given the assets.

Set Up Regular Payments

Another suitable option is to set up regular payments instead of giving your child a lump sum payment. This can help because many people are more likely to misuse large sums of money but not moderate sums. Also, even if a child blows out a payment, they won't be destitute because they will still receive future payments. One way of doing this is to buy annuities (a form of insurance) that guarantees the child regular payments at specified intervals.

Use a Protective Trust

Lastly, you can also help your child by protecting the money from unforeseen circumstances. In this case, you set up a protective trust that protects the inheritance from events or occurrences that might drain the money. Things like divorce, tax, and bankruptcy can drain even large inheritances. For example, the trustee can stop the payments until the bad occurrences blow over.

Visit websites like https://www.rmstoneattorney.com/ for more information.

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