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When it makes sense to establish a trust for an adult child

Thanksgiving is this week. If your children are all grown up, this may be one of the few times each year where the whole family has an excuse to get back together under one roof. Having the family back together might get you thinking about estate planning, because you and your spouse may be planning on leaving money and assets to your adult children.

But what do you do if you have a son or daughter who can't really be trusted with a large inheritance? Perhaps they struggle with a drug/alcohol/gambling addiction. Or you know that they've just never really been good with money. In these types of cases, leaving them a lump sum inheritance in your will could actually be detrimental to their health and wellbeing because it could enable self-destructive behaviors.

This is where a trust might prove very useful. You can put your child's designated inheritance into a trust with someone else named as the trustee. That way, your son or daughter can benefit from long-term financial help and won't be able to access the money for reasons other than its intended purposes.

For example, your trustee can make sure that the money goes directly toward paying your child's rent or providing other living expenses such as groceries. If your son or daughter does struggle with addiction, you could even use the trust as a way to encourage them to seek help. You could make the distributions contingent upon completing treatment and maintaining sobriety, for instance.

There seems to be a "black sheep" in nearly every family. And while their struggles are often frustrating, you don't necessarily need/want to cut them out of your estate plan entirely. By establishing a well-managed trust, you can make sure that your son or daughter receives an inheritance that will truly be in their best interests.

Source: NWTimes.com, "ESTATE PLANNING: When a loved one's faults need to be recognized," Christopher W. Yugo, Nov. 26, 2013

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