Children often have problems that must be addressed in estate planning. These problems include drug and alcohol addiction, criminal activity, and an inability to manage money. It is not necessary for a parent to disinherit these children. Trusts may the answer.
In the case of a child who is a substance abuser, language can be included authorizing the trustee to delay distribution for a period of time during which the beneficiary must submit to random drug tests and test drug free. For example, a trust might provide that the beneficiary submit to drug testing. If the beneficiary tests drug free for two years, distribution is made. If the beneficiary does not test drug free, the trust continues without distribution to the beneficiary for a period of five or ten years during which time the beneficiary may continue to submit for drug testing. If the beneficiary tests drug free for two years during the term of the trust, distribution is made. At the end of the outside limit, the five or ten years, the trust terminates and distribution is made to other beneficiaries.
Criminal activity can be treated in a similar manner. A trust may contain language that if a beneficiary is not incarcerated and there are no criminal charges pending for a certain period of time, distributions are made to the beneficiary. Otherwise at some point the trust terminates and the assets are distributed to other beneficiaries.
With regard to a spendthrift child, a trust may be established authorizing distributions of income only to the beneficiary or income and a small percentage of principal (for example, 5% per year) or, depending on the situation, a support trust might even be considered.
Written By Thomas D. Begley, Jr. for Beyond Counsel an Estate Planning Software Company
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