My child is off the rails, can my will protect them?
A very rich person should leave his kids enough to do anything but not enough to do nothing…
Whilst very few people could match Warren Buffett’s bank balance, almost everyone would share his sentiment. We all want to give our children every advantage possible, whilst at the same time encouraging them to be independent and resilient adults. Sometimes, despite parents’ best efforts, children and young adults lose their way. An inheritance can be more a curse than a blessing for someone who is incapable of managing their own affairs, perhaps because of addiction, unhealthy relationships or financial mismanagement. In these instances, a carefully considered estate plan is essential to protect your assets and to protect the best interests of your child. Below we look at three strategies you may wish to consider.
People are generally quite free to impose conditions on gifts in their will. As long as a condition does not violate public policy and it is not against the law, it will be upheld. In the past, some conditional gifts have raised eyebrows. A British mother gifted her children £50,000 on the condition that it was not spent on slow horses and fast women, and only a very small amount on booze. When used properly, conditions can be a very effective tool to positively influence behavior. For example, assets may be validly gifted on the condition they are used for a certain purpose, such as enrolling in an educational course or repaying a mortgage. When you cannot be sure your child will use an inheritance wisely, a condition attaching to their gift can help guide them in the right direction.
A testamentary trust is a trust created under a will. Testamentary trusts are a great structure to consider for asset protection and if you want to minimise the tax burden on your beneficiaries. They are also useful if you have a wayward or vulnerable child. Assets under a testamentary trust are held and managed by a trustee (as appointed by you) for the benefit of your nominated beneficiaries. By placing someone responsible in charge of the trust, you can be safe in the knowledge that your child will not be able to easily misuse their inheritance.
Cut them loose!
If all else fails, sometimes tough love is the best solution. You may choose not to include your children in your will. If you do so, they will likely be eligible to claim for provision out of your estate. An effectively drafted will and properly considered estate plan can reduce the chance of a successful claim against your estate. The intention of the testator is an important factor the Court considers in such family provision claims. A statutory declaration accompanying your will and a clause explaining your reasons and intentions are useful tools that can be called upon when defending a claim made against an estate. In the long run, you may feel this is the fairest and safest decision you can make on behalf of your child.
We can help
We are not always going to be around to look out for our children. However, a well drafted estate plan can go a long way to continuing the support and care that you have always wanted for your children.