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What Should I Do About an Irresponsible Heir?

Davidson Estate Law July 20, 2023

Trust and Estate Planning written in a notebookGenerally, you’ll want to make sure to provide as much as possible for your children after you pass away. However, estate planning can get more complicated if your children (or other heirs) can be irresponsible with money. To avoid worrying about how an irresponsible heir might squander an inheritance, you can set up a “spendthrift trust” with the help of a skilled estate planning attorney. 

At Davidson Estate Law, serving Oakland, California, and other Bay Area locations, including Walnut Creek, Berkeley, San Francisco, El Cerrito, and Alameda, we help our clients draft detailed trusts for improvident beneficiaries. 

Examples of Heirs Who May Be Irresponsible 

Perhaps your intended beneficiary suffers from substance abuse issues. Maybe they have shown that they are extravagant and are likely to spend a large amount of money very quickly. In other cases, the heir might be too young or irresponsible to know how to properly manage an inheritance. Other heirs might not have found a job that suits them, or may show a disinclination to work at all. In all of these situations, setting up a spendthrift trust for them is a wise option.  

It’s important to note that you can also set up a “special needs trust” for an heir who might have medical or cognitive problems that impair their ability to work. This kind of trust can be very useful for covering medical and living expenses. Your attorney can give you more information on this kind of trust. 

Establishing a Trust That Protects the Inheritance

A spendthrift trust can protect the assets in the trust in multiple ways. First, money in a trust is safe from creditors. Second, a trust does not go through probate when you die. Third, you can set up the trust in any way that you think would best suit the beneficiary while protecting them from overspending.

For example, if your beneficiary will likely be tempted to overspend if they receive their entire inheritance at once, you can indicate that you only want the beneficiary to receive the inheritance in installments. You can specify that the trust is only payable on certain conditions—for instance, if the beneficiary remains clean and sober. All of this is the responsibility of the trustee. 

The Role of the Trustee

Your trustee will be responsible for managing the assets in the trust and distributing them to the beneficiary according to the terms of the trust after you have died. The amount of power the trustee has in determining how the beneficiary receives the money can vary according to the specifications you decide upon. For example, a trustee can decide how much to give the beneficiary at certain points, or they can be instructed to follow the terms.  

A trustee has many responsibilities. For example, according to the State of California Franchise Tax Board, executors may need to file returns if certain tax conditions apply to income received by the trust. They will also most likely be required to discuss the terms of the trust and payouts with the beneficiary on a regular basis. It’s important to choose a trustee who can handle the pressure that may come with the role. 

Non-Monetary Assets 

You can include non-monetary assets in trusts—for example, a car or a house. Non-monetary assets can benefit beneficiaries while limiting their spending. For instance, you can include a house in a trust for the beneficiary to live in, adding stipulations that the sale of the house can only be used to buy another home or pay off debts.  

An attorney can help you figure out which assets are best to place in a trust and can work with you to decide on terms that will suit the beneficiary while protecting the assets in the trust. 

Turn to Dependable Legal Guidance 

At Davidson Estate Law, we are here to advise you on creating a trust that fits your personal situation. Our experienced estate planning attorney will work with you to craft an estate plan that reflects your specific needs, with the goal of securing security and peace of mind for you and your family. Call us at Davidson Estate Law for a consultation.