If you have been thinking about your estate plan recently, likely, you will already have a good idea of the people whom you would like to inherit your estate. You may want to leave your estate to your children or grandchildren. If this is the case, you may have some concerns about whether inheriting a large sum of money will be detrimental to their long-term well-being. If a person inherits a large sum of money when they are not wise enough to make smart decisions with it, they may be frivolous with their inheritance.
Luckily, there are ways that estate planners can control the way that heirs spend their inheritance. This means that, to a certain extent, you will be able to prevent a grandchild from wasting their inheritance on partying, and ensure that they invest in it wisely. The following are some tips for setting provisions on trusts.
Include no-contest clauses
The last thing you’ll want is the trouble-maker of the family contesting your will and trust after you pass away. If you think that this could be a possibility, you can simply include a no-contest clause within your estate planning documents. This means that if one person decides to dispute the will or trust, they’ll be completely disinherited.
Set up a trust
Trusts allow for greater flexibility when transferring assets to heirs. Most notably, they make it possible for assets to be transferred gradually, or until the beneficiary reaches a certain age. So if you are worried that your 18-year-old grandchild may waste their inheritance during their college years, you may want to add a provision that delays their inheritance until they reach the age of 25 or 30. Alternatively, you may want to distribute the funds gradually. This could mean that your grandchildren each receive a modest sum annually, rather than all their inheritance at once.
Plan for the worst
Instead of assuming that your loved ones will mature over time, you should plan your estate by expecting the worst. By doing so, you’ll be able to create a controlled plan that protects your estate from being misused.
If you want to control the way that your beneficiaries spend their inheritance, establish a strategic estate plan.