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Problem heirs require extra planning

On Behalf of | Sep 6, 2011 | Trusts |

Inheritance can be a tricky issue in more than one way. There are often hard feelings and rivalry often at play in decisions about who gets what or how much and how they will spend or use their inheritance. There are also practical considerations concerning the potential for complications down the road. Among those who may become problem heirs are adult children, caregivers, and children-in-law.

Adult children are one potential problem heir, particularly where there is a concern as to how they will use their inheritance. Drug or alcohol abuse issues come to mind here. One possibility in these situations is to use a trust to leave assets to the child, including language which limits or delays distributions. In such a trust arrangement, you would select the terms of distribution and an attorney would help ensure that those terms are in accordance with the relevant law.

Daughters-in-law and sons-in-law can be a potential issue in the event your child gets divorced. Without proper planning, inheritance left to such a child may not be entirely for their benefit. One possibility is that a divorce court would take into account the inheritance when determining an alimony award, and could reduce the award because of the inheritance.

Another possibility is that money left to a child at the parent’s death may be commingled with the spouse’s money. If a divorce occurs after that, the spouse would be entitled to receive some of the inheritance. In both situations, the parent could establish a trust with regular monthly distributions. That would limit the likelihood that a divorce court would reduce an alimony award. It would also keep the inheritance from being commingled with the spouse’s assets. In the second situation, the child may also consider setting up a prenuptial or ante-nuptial agreement.

Another potentially problematic kind of heir is the caregiver. These are individuals who assist elderly persons with their daily tasks. These heirs can be problematic because they may involve elder abuse and could give rise to challenges to bequests made to the caregiver once the elderly person dies. The best advice as far as caregivers is for children to regularly check in on the situation and get to know the caregiver better.

In dealing with these types of issues, it is important to emphasize the planning aspect of estate planning. Updating your plan periodically will ensure that it serves the needs of you and your family’s particular situation.

Source: nj.com, “Your Legal Corner: Problem heirs and estate planning,” Victoria Dalton, Sep, 2011.