Inheritance for Troubled Children: A Lifeline or a Noose?

6:56 pm Asset Protection, California Trusts, Estate Planning

lifesaver 150x150 Inheritance for Troubled Children: A Lifeline or a Noose?Many parents of troubled children wonder if leaving them an inheritance will only make matters worse, and often look for ways to still keep them afloat without leaving them too many resources to drown themselves.

A recent New York Times article addresses this issue, and offers these suggestions:

Annuities:  Parents who wish to restrict a troubled child’s access to cash and who have less than millions to leave may want to consider a simple annuity.  By properly titling the assets via a beneficiary designation form, parents can still direct how the assets are to be distributed.

Incentive Trusts:  If you feel a child may benefit from a “carrot-and-stick” approach, an incentive trust may be a viable option.  Incentive trusts set hurdles for heirs to meet prior to receive their inheritance, so whether it is finishing college or being sober for a set period of time, an incentive trust may be the answer for adult children who respond well to these kinds of incentives.

Dynasty Trusts:  With the gift tax exemption currently at $5 million, the interest in dynasty trusts has increased over the past year.  Dynasty trusts last forever, or at least until the money is gone, and can be a way for wealthy parents to spread the wealth down through generations, protecting assets that may otherwise be spent unwisely by troubled offspring.

While it is unlikely that you can govern the behavior of your children from the grave if you’ve been unsuccessful doing so in life, these asset protection strategies could have a place in your estate plan.

Contact us today and let our Newport Beach law firm help you with all your financial planning needs.

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