If you are the parent of more than one child, you have undoubtedly made a concerted effort to treat your children equally and not play favorites. You may feel the need to do the same thing when it comes time to think about how to distribute your estate. When your children are minors, your estate plan will likely rely on a trust to protect the assets intended for them. When your children are young, there are no extenuating circumstances to consider which makes decisions regarding the distribution of assets within your estate plan much easier. Once they are adults, however, things may become much more complicated. Below we will discuss options for dividing your estate unequally among your children.
Why Might You Decide on an Unequal Distribution?
If you are hesitant to divide your estate equally among your children, there is undoubtedly a legitimate reason for your hesitation that as nothing to do with favoring one child over the others. A more likely explanation is that you are concerned about what will happen to the inheritance you leave to one of your children. This concern may be for one of several common reasons, such as:
- Your child is a spendthrift. A spendthrift is someone who simply doesn’t handle money well. When your adult child is a spendthrift it definitely creates a problem when it comes time to pass down an inheritance. You may as well flush the assets down the toilet I you plan to hand them to someone who cannot handle money.
- You suspect (or know) that your child has a substance abuse, gambling, or shopping addiction. It could be substance abuse, gambling, shopping, or any other addiction that worries you. Failing to admit the truth — and plan accordingly — in this case could result in your child spending his/her inheritance on that addiction within a very short time after receiving it.
- Your child has a mental health issue. If your child suffers from a mental health issue, managing an inheritance may be asking a lot. If your child has special needs, receiving an inheritance could also jeopardize his/her eligibility for much needed state and federal assistance programs such as Medicaid and SSI.
- You are concerned about the influence of a spouse. If your child is married, your son or daughter-in-law may be the source of your concern if he/she is particularly controlling and/or if it appears that the couple is headed for divorce. Once in divorce court, your hard-earned assets could be awarded to the spouse.
Can a Trust Help?
When a problematic child causes a parent to worry over the distribution of his/here estate assets it can be heart-wrenching because no parent wants to treat their children differently. If you find yourself in precisely that position, the good news is that an estate planning tool can help. Many people in your position choose to resolve the issue by creating a trust to hold one child’s share of the estate. In fact, you could use the same trust you created when your children were minors and continue to use that trust to distribute your estate assets to all of your children.
A trust allows you to appoint a Trustee to manage the trust assets and distribute them according to your wishes as expressed in the trust terms. If you are concerned that your child will squander his/her inheritance, your trust terms could specify that trust assets are only to be used to pay for things such as education, medical, or housing expenses. In addition, assets held in a trust are not actually owned by your child, meaning they cannot be lost to a spouse in a divorce. Using a trust allows you to divide your estate equally among your children without having to worry that the assets will be lost or squandered, providing a relatively simple solution to a complex problem.
Please download our FREE estate planning checklist. If you have additional questions or concerns about the best way to divide your estate assets among your children, or any other estate planning questions, contact us at the Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 or by filling out our online contact form.