My child is off the rails, can my will pro­tect them?

In Brief

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.

Con­di­tion­al gifts

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.

Tes­ta­men­tary trusts

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.