How To Help Your Adult Child With Money

PROVIDING FOR ADULT CHILDREN WHO CAN’T HANDLE MONEY, ARE SPENDTHRIFTS, HAVE ADDICTION ISSUES, POOR JUDGMENT, HAVE BEEN IN TROUBLE WITH THE LAW OR HAVE JUDGMENTS AGAINST THEM.

We all love our children and would do anything for them, but once they become adults and are out on their own, some go down the wrong patch, and in a direction we do not want them headed. Our office often get questions from clients regarding what to do with an adult child who has money problems, has an addiction, has been in trouble with the law, or has judgments against them. Clients are often concerned that when they die, and put a bundle of money in their hands, it will be wasted or seized by the child’s creditors. Thankfully, with a revocable living trust, there are numerous options to resolve these concerns.

With a Trust, you have the option of not putting an inheritance directly in the hands of a beneficiary all at once. You can dictate when they receive that inheritance, if at all. E.g., you can parse it out to them over a number of years by designating ages when they are to receive it. For example, you can say they are to receive 1/3 at age 30, 1/3 at age 35 and 1/3 at age 40 (or any ages you chose). The hope is that once they mature, they will have recovered from their poor decisions. Nevertheless, sometimes this is not enough, and more drastic planning is required.

In such situation, a client can set up their trust to keep a child’s inheritance in a lifetime trust and thus never put it into their hands or under their control. Their share stays in trust and is controlled by a Trustee (either another relative or a financial institution) where the child can go to get money to pay for particular expenses. As a result, they have use of this money, but no control over it. All expenditures would need to be approved to by the independent Trustee. Setting things up this way would also protect it from creditors as the bulk of the Trust is never put into the child’s hands. While this is set up to protect the child, just be aware most adult children don’t such restrictions on their inheritance, particularly if their siblings received their money outright. It may cause resentment toward their siblings, but sometimes there is no other choice.