When planning one’s last will and testament, one always hopes that the people they will be passing on their hard-earned wealth to will be responsible enough to handle it well and if possible, carry on their legacy.
This is a hope which can be difficult to keep alive, especially in cases where the heirs have issues such as bad spending habits, drug addiction, gambling problems, and other weaknesses which compromise their judgment. When passing your estate to an imperfect heir, you need to make sure that you have put in place measures to control the manner in which they will use the money to prevent wastage. Here are some of the most common approaches.
Creating a trust
A trust is one of the ways in which you can pass on wealth to an heir while at the same time controlling the manner in which they use the money.You can open a trust fund and appoint someone to play the role of trustee. The trustee is usually an independent and non-partisan party to the agreement. They should also be responsible, trustworthy, firm and principled. There are people who opt to appoint family members as trustees although there are times that these arrangements do not work out because of the possibility that they will cave when pressured by a family member who needs the money.The ideal features of a trust is that they can specify the circumstances under which the money can be withdrawn. There are also trusts which state that it is only the trustee who will have discretion on when the funds can be disbursed.
There are other approaches proven to have some success:
- You could decide to only have a lump sum payment made to them after they graduate from college
- You could decide to have chunks of the money offered to them after a specified period of time of sobriety. For instance, you could have money released to them after five years of being sober.
- You could create a will which says that payments are made directly to their utility providers such as their landlords and other utility companies
There are many other specifications which you can make, but the most important part of to ensure that you are dealing with a professional who understands the rules and regulations of the process.
Dealing with the problem at the present
Another approach that many people never think about, and one that can be more helpful than trying to make safety nets, is dealing with the problem in the present. For instance, if you have a child that has an addiction issue, you can work to correct the issue now. Speak to them in the present and tell them that they need to get help. Create incentives that work in the present and work towards making sure that by the time you are approaching your sunset, the child has tried their best to reform.
This may sound harsh, but in some circumstances, when you have tried all other approaches and when you are sure that leaving the property to the problematic heir will just be the same as throwing it away, you can choose to disinherit them. However, this is a last resort and usually applied if everything else that you can think about has completely stopped working.
These are just a few of the ways in which you can resolve the inheritance issue when their heirs are less than perfect. Ensure that you start looking for a solution long beforehand so that you can protect the child and/or family member from further destruction.