What happens when you leave funds to a child with a substance abuse problem like drug addiction? Giving such a child the opportunity to easily demand money from the trust would prove heavily detrimental. The best way to protect such a child is by creating a proper estate plan document. One of such document is a lifetime trust. With a lifetime trust, the child has no right to demand for cash regardless of his/her age but it is left to the discretion of the trustee to distribute funds when necessary and thus, the child has a better liability protection with a lifetime trust.
The importance of creating an estate plan is heightened when you have concerns that your problem child may run into huge debts or divorce in the future. With a normal trust for minors, once the child attains 18, he/she could simply withdraw funds from the trust and squander it out of youthful lusts, but this is avoided when a lifetime trust is established.
No matter what stage you are in life, strategic estate planning for your black sheep beneficiaries is crucial.
How do you plan for black sheep beneficiaries?
Name a guardian for the beneficiary
If you have minors, the first thing to do is to write your will and name a guardian for your children. You should put aside those emotions telling you that you’re being pessimistic. You are not. You are only being cautious. If peradventure you pass away or become incapacitated together with your spouse, your guardian will step in to handle your duties for the child. They will use the assets you left for the child’s benefit according to your instructions in the will. In choosing a guardian, you should consider their proximity to your home, beliefs, parental competence, lifestyle, etc. You do not want to put your child in the wrong hands.
Create a trust
With a will, your appointed guardian will manage the assets until the child turns 18. Then, the entire estate will be transferred into their possession.
It is true that you don’t know how financially responsible your child will turn out to be. They are still underage, so you can’t trust them with your entire estate when they turn 18. It is advisable to create a minor’s trust within the will. With this, your trustee will continue to manage, invest, and distribute the assets according to your trust’s instructions even after the child exceeds 18. This would avoid squandering by a child who just struck a pot of gold.
In the trust, you can lay down instructions on how the money is to be used for the child’s education, healthcare, and investments till a certain time. It could be until they get married or turn 35 as you deem fit. It is a long-term security over your child. You continue to be there with them even when you’re no more.
Get powers of attorney
In the event you become incapacitated (unable to make decisions) you can authorize someone else to make decisions for your beneficiary. You can make that happen by creating a power of attorney. The financial power of attorney authorizes your agent to make financial decisions on your behalf.
Create a Third-Party Funded Special Needs Trust if you have a child with special needs
If you have an incapacitated child, then they would need extra help even after reaching adulthood. By creating a special needs trust for them; you hold assets to be managed by the trustee for your child’s benefit.
Contact our Estate planning lawyer
You will need guidance and assistance from experienced estate planning and elder law lawyers. You don’t have to do all of this alone. With help, you can plan your estate smartly. Planning now for the future with an estate lawyer would never be regretted. Preparing now for the future over your financial and medical affairs would save you and your loved ones a whole deal of stress and troubles. One wrong document or inclusion or signatory could mean or signal a whole different thing and may jeopardize your wellbeing or your estates at risk of loss and probate with the beneficiary or trustee not getting it.
It is also important to note that state laws rules over estate plan. They dictates what should be included in will, trust or power of an attorney, these state laws also regulates how the documents are filed and its implementation. This emphases the un-denying importance an estate planning attorney.