Estate Planning for Real Life Families: What If My Adult Child Is Financially Irresponsible?

Sep 18

You love your child. You want to leave them an inheritance.

You also know that if they received a large sum of money tomorrow, it might not last very long.

Maybe they struggle with budgeting. Maybe they have significant debt. Maybe they make impulsive financial decisions. Or perhaps you simply are not comfortable leaving them a substantial inheritance with no guardrails in place.

Does that mean you have to leave them out of your estate plan?

Absolutely not.

A properly structured trust can allow you to provide for your adult child while putting protections around how and when they receive their inheritance.

You Have More Options Than “All at Once” or “Nothing”

Many people assume an inheritance has to be distributed outright when a parent dies. But your estate plan can give you considerably more flexibility.

Depending on your goals, family circumstances, and the way your trust is structured, you may be able to:

Distribute the Inheritance Over Time

Instead of giving your child their entire inheritance at once, you can structure distributions to occur over time.

For example, a child might receive a portion at one age, another portion several years later, and the remainder at a later date.

This can give them access to their inheritance while reducing the risk of one large sum being spent too quickly.

Keep Assets in Trust

You do not necessarily have to require that the entire inheritance eventually be distributed directly to your child.

Assets may be able to remain in trust for your child's benefit, allowing them to receive support without taking outright ownership of the entire inheritance.

For some families, this provides a better long-term structure than simply choosing an age when everything gets handed over.

Appoint Someone Else to Manage the Money

A trust allows you to name a trustee who will oversee the assets and make distributions according to the terms you establish.

That trustee could be a trusted family member, another individual, or, depending on the circumstances, a professional trustee.

Choosing the right trustee is an important part of the planning process. You want someone who can follow your instructions while making responsible decisions when circumstances arise that you could not have anticipated.

Provide for Specific Needs

Your trust can also establish guidelines for how inherited funds may be used.

Depending on how the trust is drafted, distributions might be available for expenses such as:

Housing
Health care
Education
Transportation
Starting a business
Other needs or expenses you choose to address

This can give your child the benefit of the inheritance while limiting unrestricted access to the principal.

Consider Additional Asset Protections

Keeping inherited assets in a properly structured trust may also provide additional protections in certain circumstances.

Depending on the trust's terms and how it is administered, assets held in trust may have some protection from certain creditors, lawsuits, or claims arising from divorce.

These protections are highly dependent on how the trust is drafted and administered, which is one reason the structure of the estate plan matters.

Your Children Do Not Necessarily Need the Same Plan

One of the biggest misconceptions we hear in estate planning is that treating children fairly means treating them exactly the same.

It does not have to.

One child may be perfectly capable of receiving and managing an inheritance outright. Another may benefit from having a trustee involved or having their inheritance remain in trust.

Your estate plan can recognize those differences.

The amount each child ultimately receives may be the same while the way they receive and manage those assets is different.

For many families, that is not unequal treatment. It is thoughtful planning based on the individual needs of each beneficiary.

Think Beyond Who Gets What

Estate planning is not only about deciding who receives your assets.

It is also about deciding how those assets can best benefit the people you care about.

If you are concerned that an adult child may have difficulty managing an inheritance, the answer does not have to be excluding them from your plan. The better question may be what structure gives those assets the best chance of benefiting your child for years to come.

That is a conversation worth having while you still have the opportunity to make those decisions yourself.