Many clients have grown children who they are still worried about. These issues often come up when discussing estate planning needs. For some, the child has a disability and receives public benefits. In these cases, the goal is to avoid jeopardizing those benefits. For others, the problem is a more private or even uncomfortable issue for the client to discuss, such as an addiction or a serious debt issue. It is possible to include your child as a beneficiary, without handing the money over outright. An estate planning attorney can help identify the best method for achieving this goal, which can include the following:
1. Preserve disability benefits- A special (or supplemental) needs trust allows you to leave or give assets during your lifetime to a disabled individual without affecting his or her eligibility for governmental benefits such as SSI, Medicaid, subsidized housing or food stamps. The assets in the trust can be used to meet any needs other than those paid for by the public benefits (such as food or shelter) without affecting eligibility. These trusts are helpful in providing the beneficiary with social/recreational services, transportation, legal services, household items/maintenance, travel and leisure activities, and personal items/services, etc. For more information on this topic, see our prior blog post .
2. Prevent enabling an addiction- Whether it is drugs, alcohol, gambling, etc., if you have a child with an addiction, you may want to avoid leaving him money outright. Otherwise, the good intentioned inheritance may do more harm than good. A parent who wants to leave money to a child suffering from an addiction can make sure it is not used to fuel the addiction by leaving money for the child with certain “strings” attached. For instance, a trust can be used to appoint a trustee to manage the money, including deciding the amount and frequency of distributions, making direct payments for legitimate expenses, etc. This method can ensure the money is used to benefit, rather than harm/enable the child.
3. Curb irresponsible spending- Perhaps the problem is not necessarily harmful, but you are still concerned that your child (or perhaps her spouse) will frivolously spend through the money, rather than use it wisely. Once you leave money outright to a beneficiary, you cannot control what she does with it. For this reason, you can utilize a trust, often referred to as a “spendthrift trust”, to set terms/schedule for distributions.
4. Provide financial assistance during the child’s life- Some clients decide that they want to give an early distribution, also known as an “advancement” to a child who is in financial hardship, with the intent to equalize this lifetime gift at the end of life. The obvious problem that can arise, however, is if there is not enough money left in the client’s estate at the end of her life to ensure a fair and even distribution to other children, etc. If after understanding the potential consequences, a client does wish to make an advancement to a child, it should be well-documented and comply with all formal requirements. It may also involve amending the client’s estate plan to ensure it reflects the client’s intent.
5. Ensure your child does not inherit- For one reason or another, a client may simply want to disinherit a child. Perhaps the child is well off and the client wants to benefit his grandchildren directly at his death, or the client feels he provided for an estranged adult child enough during his life—whatever the circumstances, you have no obligation to leave anything to a child at your death. However, you do need to make sure you include language in your estate planning documents clearly expressing your desire to disinherit a child. Otherwise, the disinherited child may attempt to contest the validity of your documents, in an effort to prove the omission was an error.
As a final thought—Do not let concerns about an adult child keep you from moving forward with your estate plan. I would not advise holding off on your planning in hopes that circumstances change over time, because if necessary, amendments can be made during your life. You are not the first parent to have these estate planning issues and there is always a better solution than doing nothing.
Senior Solutions is an Estate Planning and Elder Law Firm in the Greater Boston area ready to help you. We meet with clients in either our Belmont or Hingham offices. Please call us at 617-489-5900 or email firstname.lastname@example.org to take the first step.