How To Protect Your Adult Child’s Inheritance

When a client has a child who is under 25, I always recommend that the client leave that child’s inheritance in a trust until the child reaches a more responsible age. The goal is to protect those assets and prevent a young, inexperienced beneficiary from squandering the inheritance. But what about an adult child who never seems to mature into a financially responsible individual?

Often times, it is prudent to leave an adult child’s inheritance in a trust until an advanced age or even for the child’s lifetime. When deciding whether a trust is needed to protect your child, you should honestly assess your child’s abilities. Is your adult child able to manage money properly? Do you have a child who is struggling with addiction and might not make the best decisions for himself or herself? Many clients also express concern over divorce and the risk that the child’s spouse would try to take half of the child’s inheritance. In any of these situations, a trust may be the best answer.

The trust protects the beneficiary from his own inexperience because you decide who is in control of the investment and distribution of assets by naming a Trustee. Assets may be distributed based on the needs of the beneficiary as determined by the Trustee. You can alsodirect that the Trustee distribute a certain percentage of the assets or a fixed sum at intervals you determine.

Another benefit of a trust is protection from creditors and divorce. In most instances, creditors cannot force the Trustee to withdraw funds from the trust. Rather than making distributions directly to the beneficiary, which could become subject to creditor’s claims, the Trustee could instead use the assets to pay for the beneficiary’s needs and bypass the creditor while providing for the beneficiary. The trust also provides protection from a divorcing spouse because the assets are considered separate property while held in the trust.

Trusts are a great way to protect your child’s inheritance. By controlling when and for what purposes the assets may be used, a trust enables the child to make the most out of an inheritance.

Have you planned properly to ensure that your child’s inheritance will not be squandered?  If it is time to consider updates to your plan, call our office at 770-817-4999 to schedule an update appointment.

Want to learn more about Asset Protection?  We are hosting a webinar with attorney Douglass Lodmell, an expert on the subject, on March 25th.  For more information or to register, click here.

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