As a loving parent, you want to protect your family if something happens to you. When your children are younger, you’ll need to provide instructions on managing your finances and property, and who will act as their guardian.
However when an inheritance involves adult children, the situation changes dramatically. They may be married with families of their own to care for, or living independently and making their own financial decisions.
What do you do if one of them has consistently demonstrated they make poor choices when it comes to handling money? Although you may not want to leave them out of a will or trust entirely, you’ll also want to ensure that they don’t fritter away your hard-earned assets.
Consider a Revocable Living Trust
Wills and trusts are legal documents often used in the estate planning process. A will details how to distribute your assets, but it only takes effect after you pass away and doesn’t help if you become incapacitated and can’t make your own financial decisions. On the other hand, a revocable living trust allows you to draft specific instructions for the management of your estate not only while you are living, but also if you pass away or become incapacitated. And if circumstances change, you can also change the terms of the trust throughout your lifetime. With a trust, you appoint a successor trustee, which can be a family member, trusted friend or a professional corporate institution who will carry out your wishes if you pass away or are no longer able to make financial decisions. A trust typically avoids probate so your family maintains its privacy and distributing trust assets may be a faster process and less costly as compared to assets that are subject to probate court proceedings under a will.
Mind the Details
Another benefit of a trust is that you can be very specific about how you want your assets passed on. Because you appoint a trustee to carry out your wishes, you can set reasonable limits on the distribution of your money and property. For instance, you can set up age-based installments to your adult child so that they don’t spend it all in one go. The idea is that you can bolster your adult child’s financial security over time and protect them from making rash decisions that a sudden influx of cash might bring. You might also consider distributing the money as an incentive. For instance, you could earmark it for going to college or a trade school. In addition, if you have another child who is responsible with money, you can tailor your instructions so they receive their share of the inheritance differently.
You can also use very strong language regarding the trust. For instance, some individuals have indicated that if any family members dispute a trust, they are no longer able to inherit. This may sound harsh, but many families, especially wealthier ones, have spent years fighting over an inheritance. After all, you know your family better than anyone does, and you want their lives to improve because of your careful planning.
Talk to Your Children
It’s also a good idea to have a money talk with your children so they’re not surprised by the terms of your will or trust. In some cases, leaving your assets can come as a windfall. However, if an adult child has proven repeatedly that they can’t manage their own finances you’ll want to ensure that they understand the reasoning behind the distribution of your assets. It may be an uncomfortable talk to have, but you don’t want them to be surprised or hurt by your decisions.
We’re Here to Help
If you don’t have a will or trust to protect your family’s future, a SchoolsFirst FCU financial advisor can help evaluate your estate-planning needs and if necessary, connect you with an estate-planning attorney. While our team provides estate-planning guidance, we don’t draft wills, trusts or any other legal documents. However, we offer attorney-screening procedures to assist you in finding an estate-planning attorney. You can either request a consultation online or call to make an appointment at 714-258-4116, option 2. Monday through Friday from 9 a.m. to 5 p.m. and Saturday 9 a.m. to 2 p.m.
We also partner with Members Trust Company, a national investment and trust services company owned by credit unions, to provide professional trust administration services to our Members. For a reasonable fee, Members Trust Company will expertly administer trusts with a minimum balance of $150,000+, relieving your loved ones of this responsibility.
Trust services available through Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency.
Securities sold, advisory services are offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with SchoolsFirst FCU to make securities available to Members. Not NCUA/NCUSIF/FDIC insured, may lose value, no financial institution guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc. is a registered broker/dealer in all fifty states of the United States of America.
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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or GreenPath Financial Wellness counselor who can help tailor a solution for you.
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