After you have passed, will your beneficiaries use their inheritance in a manner you intended for it? Or will they squander/waste it foolishly? How are they today at managing their own money? That may give you some idea as to how their inheritance will be spent after you are gone.
Evaluating the maturity, spending habits, bad habits of your beneficiaries, most of the time your children, will help determine how to construct the distribution to them. Many people like the idea of holding an inheritance in trust until the beneficiary reaches a certain age, such as 30 years of age. Others like giving their children 1/3 of their inheritance after they are both gone, with another 1/3 five years later, and the remaining balance five years after that. That gives the beneficiary three chances to squander it!
If you believe you kids have not followed your teachings, or they have traits that worry you, through your California estate plan, you could require that a beneficiary be tested drug or alcohol free monthly for X years before receiving an inheritance outright.
Another popular form of estate planning involves leaving property in trust for a beneficiary’s lifetime without ever distributing it outright to the beneficiary. This is done because, as long as the inheritance is being held in trust, it can be protected from the beneficiary’s bad spending habits, from their creditors, from divorcing spouses, and bankruptcy. Also, this type of trust can control where the inheritance goes upon the death of the beneficiary, or can also give the beneficiary the ability to pass the trust property on to other family members as the beneficiary decides. It may be fair to state that most people would prefer to see a deceased child’s inheritance go to their other children rather than their deceased child’s spouse.
If you have beneficiaries who cause you to lay awake at night thinking of how they may blow their inheritance away, contact Fremont Estate Planning Attorneys at the Singh Law Firm at (510) 742-9500 to understand how you can plan for the spendthrift beneficiary.
