Q: I have three children. I don't worry about two of them. However, one of them has me concerned. He tries hard but can't seem to stay out of trouble.
If I leave his money to a trust, do you think he will be angry or hurt? Do a lot of people leave money in trust for one child but not the others?
A: This is a really good question. I see a lot of people establishing trusts for loved ones rather than giving them their inheritance outright, and the reasons can vary greatly.
Perhaps the most common reason for establishing a trust for a loved one is due to age. For example, I have three sons: a 13-year-old and 10-year-old twins.
My estate plan establishes a trust for them in the event they are under the age of 25 when I die. I hope that I make it another 15 years, but if I don't I'm going to make sure a responsible adult stands between them and a pile of money, even if it's a small pile.
My little knuckleheads can't even remember to close their dresser drawers after they pull out a sweatshirt. I'm pretty sure they aren't mature enough to handle money yet.
The second most common reason that people establish a trust for a loved one is because they are really bad with money. Those of us in the business call them spendthrifts, but I'm sure you have a different name for them.
By establishing a trust for a spendthrift, you can limit their access to the money. With a little planning on your part, you can make the money last a little longer.
Another common reason for establishing a trust for a loved one is because of some sort of addiction issue. People sometimes make bad decisions and end up addicted to drugs and alcohol. That doesn't mean they are bad, they just have some issues that they need to deal with.
In those cases, a trust is not only appropriate, it may be an absolute necessity. Handing a pile of money to someone with an addiction issue can be dangerous.
Do I think that your son will be angry with you for setting up a trust for him? Probably, but I doubt that he'll be surprised. The issues you described in your letter aren't that uncommon, and I'm willing to bet that deep down inside he knows that he needs help. Whether he'll ask for it is another question.
I'm glad that you recognize the issue and want to address it. A lot of people are reluctant to acknowledge a loved one's short comings. Denial ain't just a river in Egypt.
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