How Trusts Can Help You Protect your Adult Children in the Event of Your Death
Parents do not stop worrying about or protecting their children once their children turn 18. While parents are living they can help their children by providing the financial support that they deem appropriate, if they able to do so. But, what happens if a parent passes away and still wants to protect his or her adult children? Is there any legal way to provide financial support to an adult child and maintain some control over it after your death? Certain types of trusts can be established to provide money to and to protect adult children.
Incentive trusts are often used by parents to provide money to their children so long as their children do certain things. For example, a parent may not allow a child to access the trust money unless he graduates college or maintains a job for a certain amount of time. Similarly, a parent can refuse to allow a child access to trust money if she is abusing drugs or alcohol. It is a way for a parent to encourage certain behaviors even if the parent is not alive to do it himself. However, it is important for parents to think carefully about the incentives that they associate with the trust and to draft the trust document carefully. For example, if you require your daughter to earn a $100,000 of her own before accessing the trust would you be discouraging her from taking a job with a charitable organization or taking time off to be a stay at home parent? Some experts also warn parents to be careful not to set unreasonable expectations that may foster resentment among your children.
You Cannot Require a Child to Violate Public Policy
Incentive trusts allow you to attach certain restrictions to when your child may use the money that you have in his or her trust account. However, it is important that your trust not violate public policy. For example, you cannot require your child to divorce his or her spouse or to commit an illegal act. If you attach these provisions to your trust then a court will likely fund the trust null and void and allow your child full and unrestricted access to the trust funds.
Parents may also establish spendthrift trusts for their children. Spendthrift trusts restrict the amount of trust money that may be spent by the trust beneficiary. Instead of the trust beneficiary making decisions about how the money is spent, an independent trustee has that authority and may provide money to the beneficiary as needed. Typically, as needed is defined as for the health and maintenance of the individual but may also include things such as education if the creator of the trust so desires.
Trusts are a valuable estate planning tool that allows parents to provide for their adult children and maintain some control over how the money is used or how the child lives his or her life. However, if a trust is not legally constructed then the parent’s intentions may not be honored. Therefore, it is important to make sure that your trust is legally drafted and compliant with state laws so that you can continue to protect your adult children after your death.
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