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Can you influence how a beneficiary uses their inheritance?

On Behalf of | Jul 22, 2024 | estate planning | 0 comments

You have two children who are going to be the main beneficiaries of your estate plan. You’re leaving them the bulk of your wealth, seeing this as one more way that you can care for them even after you pass away. You’ve worked your whole life to save up this money for them. 

One of your children is very financially responsible. You know that they are likely to save the money for retirement, start a business, buy a family home, pay off their student loans or something of this nature. 

The other beneficiary, however, has more frivolous spending habits. You are worried that they are just going to quit their job, travel the world, or make purchases that you would not necessarily approve of. Maybe they’ve even had encounters with the police or a history of illegal drug use. Is there any way for you to influence how they spend the money?

Using a trust

One option that you have is to put the money for your second beneficiary into a trust. You can then pick someone to be the trustee, and that person will either follow the instructions you left them – such as saying that the money can only be used for college education costs – or they will use their discretion to approve purchases and payouts.

It is worth noting that it is best not to name the other sibling as the trustee. You want to keep these accounts separate and avoid causing conflicts between your adult children. But the trust still lets you decide how the beneficiary can use the money, so you protect them from their own problematic spending habits. As you make your estate plan, carefully consider all of the legal tools you can use.

 

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