Estate Planning Mistake: Leaving Assets Outright to Adult Children

People understand why minor children and young adults shouldn't inherit property outright. Someone with more maturity and experience needs to manage the assets and make spending decisions. So inheritances are typically left in temporary trusts until they attain a certain age (say, 30 years of age). Then the assets are distributed outright to the beneficiary.

But there are compelling reasons to not provide for outright distribution to adult children, even if they have good judgment. You can give your adult child the gift of asset protection, because bad things can happen to anyone. We offer the Personal Asset Trust (the "PAT").

Consider the risks that anyone can face:

Divorce:

A lot of people may think that’s not a major issue, but if you look at the divorce rate in California, it’s over 50%. Divorce is a real issue and when someone receives an inheritance, it’s not protected from a divorcing spouse.

High-Risk Profession or Business:

Doctors, lawyers and owners of rental properties are at risk for lawsuits. The PAT builds legal walls around your beneficiary’s inheritance that protects their inheritance against judgments and creditors.

When a Beneficiary is Not Good At Handling Money:

These are people who should not be managing money for themselves. You can name a trustee to manage it for them over their lifetime.

A Beneficiary Who Has Drug or Alcohol Problems:

Again, you can name a trustee to manage it for them. You can even have provisions for drug testing and treatment. The trust can have an on-off switch giving the trustee the discretion to stop making distributions when it is in the beneficiary's best interests (can demand drug testing). Distributions can be resumed when the trustee determines it is again in the beneficiary's best interests.

Want to Learn More About Asset Protection for Your Beneficiaries?

Giving your adult child the gift of asset protection against judgments, creditors, divorcing spouses, and etc. is a powerful legacy. If you want to learn more, set up a free initial consultation at our Beverly Hills or Calabasas offices or complete the form on this page to ask us any questions you have.

 

 

 

 

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