Many Californians have some familiarity with wills and trusts, whereas others are just starting to learn the differences and potential benefits of each. When parents have children, it is important to think about not only how to fairly divide the assets among the kids but also how to protect children who cannot be trusted with their inheritance.
One issue that can come up during estate planning is how to take care of children who have an addiction to drugs, gambling, or some other costly and unhealthy vice. Parents typically want to provide for these children, but they tend to understand that giving that child a lump sum of money is not the way to do it. If these parents create a trust, then a designated trustee will manage the funds and could ensure that children only get as much money as they need for necessities. Alternately, parents could set up a trust so that their children only get a certain amount of money from the trust every year.
Parents can also speak with an attorney about adding conditional provisions to a trust. For instance, a child who is not responsible with money could be required to hold gainful employment in order to receive distributions from the trust.
It is important to consider all types of assets and property when creating a trust. For instance, if parents have a life insurance policy, they will probably need to look into whether it is possible to add life insurance to a will, which could make it easier to distribute than if the assets first have to pass through probate. If individuals have concerns about how their beneficiaries will receive their inheritance or how to watch out for a spendthrift heir, consulting with an estate planning attorney might help.