As you start preparing for retirement or review your finances in your golden years, you may derive quite a bit of joy from the idea of passing on some of your wealth to your children when you die. An inheritance could lead to a more comfortable retirement for your children or allow them to pursue their dream of opening a small business.
However, for a significant number of adults, a large inheritance can cause serious harm. If any of these three scenarios below applies to one of your primary beneficiaries, then you may need to consider using a trust or another tool to pass on property without giving someone a direct inheritance.
An unhealthy marriage
One of the most heartbreaking experiences for a parent is to witness the child that you love in a relationship with someone that mistreats them. A child married to an abusive partner may need support from their family but may also be at risk of their spouse misappropriating anything that they receive directly.
A trust will prevent an abusive spouse from gaining control over an inheritance and will reduce the motivation they have to harm your child for control over that inheritance.
A history of substance abuse
Whether your child has had a drunk driving arrest or a lengthy battle with prescription medication abuse, they may have current or previous substance abuse issues that make you worried about their health and safety.
A large inheritance combined with the trauma of losing a parent could trigger very dangerous behavior like binging on a specific substance. A trust will limit how much your child can access at once and provides oversight to prevent them from misusing their inheritance.
A toxic relationship with their sibling
Your children might fight with one another over the inheritance you want them to receive. The more imbalanced or personalized your estate plan is, the more likely your children are to fight with one another or to choose to challenge your last wishes in probate court.
Such actions will diminish what everybody receives and possibly tear apart the family. A trust is much harder to challenge in probate court and also provides more oversight regarding how people distribute and use the resources from your estate.
Recognizing when a standard inheritance could do more harm than good can help you employ the best tools while planning your estate.