As a parent, it may be important for you to leave an inheritance for your children. Most parents agree that young adults and minor children do not know how to spend an inheritance wisely. What about older adult children?
Parents of adult children understand that grown people may not always be financially responsible. There could be several reasons an adult makes reckless financial moves. Some adults have high debts or are in an occupation with a high risk of lawsuits.
According to Forbes, there are ways that parents can use trusts to help their children be more fiscally responsible.
Limit annual distributions
When you establish a trust for your children, you can choose which children need extra monitoring and which are financially responsible. For those who need extra assistance, you can limit the annual distributions. Consider distributing only the investment income or a percentage each year. Likewise, you can set it up only to distribute based on the needs or best interests of your child. The trust can even pay bills directly, rather than providing your beneficiaries with a lump sum.
Allow trustee to use discretion
Your trustee can use his or her discretion when it comes to the best interests and needs of your children. Additionally, he or she could have the discretion to turn the trust on or off. If your son or daughter has a substance abuse problem or gambling addiction, the trustee can choose to turn off the trust until he or she receives help. The trustee determines when your child is responsible enough to receive distributions.