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Is Your Beneficiary Ready to Handle an Inheritance?

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ready to handle an inheritance
Not all beneficiaries are ready to handle an inheritance.

A recent Kiplinger article asks: “Is Your Beneficiary Ready to Receive Money?” In fact, not everyone will be mentally or emotionally prepared for the money you wish to leave them. Are your beneficiaries ready to handle an inheritance? Here are some things to consider:

The Beneficiary’s Age. Children under 18 years old cannot sign legal contracts. Without some planning, the court will take custody of the funds on the child’s behalf. This could occur via custody accounts or guardianships. If this happens, there’s little control over how the money will be used. The guardianship will usually end and the funds will be paid to the child when they become a legal adult. Giving significant financial resources to a young adult who’s not ready to handle an inheritance often ends in disaster. Consider working with an estate planning attorney to avoid this result.

The Beneficiary’s Lifestyle. There are many other circumstances which you need to consider when creating your estate plan. These include planning for a beneficiary who:

  • Has a substance abuse or gambling problem;
  • Winds up in an abusive relationship;
  • Is sued;
  • Is going through a divorce;
  • Has a disability; or
  • Who’s unable to manage assets.

All of these issues can be addressed with the aid of an estate planning attorney. A trust can be created to make certain that minors (and adults who just may not be ready) don’t get money too soon, while also making sure funds are available to help with school, health care, and life expenses.

Who Will Manage the Trust? Every trust must have a trustee. Find a person who is willing to do the work. You can also engage a professional trust company for larger trusts. The trustee will distribute funds according to the instructions you specify in your trust document. You can even add conditions to your bequests; these conditions could include getting an education, or using the money for a home or for substance abuse rehab.

Estate Plan Review. Review your estate plan after major life events or every few years. Talk to a qualified estate planning attorney to make the process easier and to be certain that your money goes to the right people at the right time – when they’re ready to handle an inheritance.

Reference: Kiplinger (April 1, 2019) “Is Your Beneficiary Ready to Receive Money?”