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Many & LoCoco Legal Blog

Thursday, November 1, 2012

Estate Planning: Leaving Assets to a ‘Troubled’ Heir

 

If you have a child or grandchild who is addicted to drugs or alcohol, or who is financially irresponsible, you already know the heartbreak associated with trying to help that child or grandchild make healthy decisions.  Perhaps your other adult children or grandchildren are living independent lives, but this child or grandchild still turns to you to bail him out – either figuratively or literally – of trouble.

If these are your circumstances, you are probably already worrying about how to continue to help your child or grandchild once you are gone.  You predict that your child or grandchild will misuse any lump sum of money left to him or her via your will.  You don’t want to completely cut this child or grandchild out of your estate plan, but at the same time, you don’t want to enable destructive behavior or throw good money after bad.

Trusts are an estate planning tool you can use to provide an inheritance to a worrisome heir while maintaining control over how, when, where, and why the heir accesses the funds.  This type of trust is sometimes called a spendthrift trust.  

As with all trusts, you designate a trustee who controls the funds that will be left to the heir.  This trustee can be an independent third party (there are companies that specialize in this type of work or sometimes banks and their respective Trusts departments are used) or, as in most cases, a member of the family is named as trustee.  Who to name as trustee is usually an agonizing decision for the client. Some clients will often opt for a third party as a trustee, to prevent accusations among family members about favoritism, or avoiding giving one family member a headache to deal with for the rest of their lives. Or other clients will only consider naming family members as trustees and not a thrid party, as they believe the decisions and control of the trust should be in the hands of someone they know and who knows the dynamics of the family. The decision as to who to name as trustee is a personal decision and should be discussed at length with the estate planning attorney preparing your will.

The trust can specify the exact circumstances under which money will be disbursed to the heir.  Or, more simply, the trust can specify that the trustee has complete and sole discretion to disburse funds when the heir applies for money.  It can also establish that funds from the trust be distributed out over time at set intervals to avoid the child or grandchild getting one large lumpsum payment at one time.

If you are considering writing this type of complex trust, it is advisable to seek assistance from a qualified and experienced estate planning attorney who can help you devise a plan that best accomplishes your wishes with respect to your child or grandchild.
 

 

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Many & LoCoco

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(504) 483-2332


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The Attorneys of Many & LoCoco assist clients throughout parts of Southern Louisiana, including but not limited to New Orleans, Metairie, Mandeville, Convington, Gretna, Arabi, Marrero, Westwego, Harvey, Chalmette, Kenner, and the Parishes of Orleans, Jefferson, St. Tammany, and St. Bernard, LA.



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