How Do I Stop Heirs from Foolishly Wasting Inheritance?
This is a problem solved by a trust—a “spendthrift” trust. With a spendthrift provision in a testamentary trust created under a will or an inheritance trust created under a revocable living trust, the trustee makes all decisions about distributions. This can be an effective means of controlling the flow of money.
A spendthrift trust, according to the article “Possible to spendthrift-proof a trust” from Record Courier, is created for the benefit and protection of a financially irresponsible person.
For a spendthrift trust, it may be better not to choose a family member or trusted friend to serve as the trustee. Such person might not live long enough or have the capacity to serve as trustee for as long as required, especially if the heir is a young adult. Conflicts among family members are common, when money is involved. An independent and well-established trust company or bank may be a better choice as a trustee. Large estates often go this route, since their services can be expensive. However, some retail banks do have a private wealth division. All options need to be explored.
Another benefit to a spendthrift trust—funds are protected against current or future creditors of the beneficiary. Let’s say a parent wants to leave money to a child, but knows the child has credit card debt already. Unless they are co-signers, the parent and their estate do not have a duty to pay an adult child’s debts. The spendthrift trust will not be accessible to the credit card company.
It is difficult to set up a spendthrift trust to protect one’s own money from creditors. This is something that must be approached only with an experienced estate planning attorney. This is because the rules are complex and there are significant limitations. If you wanted to create a spendthrift trust for yourself, you would have to completely give over control of assets to the trustee. There is no way to predict whether a court will consider the person to have relinquished enough control to make the trust valid.
This type of spendthrift trust may not be created with an intent to defraud, delay or hinder creditors. Doing so may make the trust invalid and any possible protection will be lost.
A spendthrift provision in a will is a clause used to protect a beneficiary from a creditor attaching prior debts against the beneficiary’s future inheritance. This means that the creditor may not force an heir or the estate’s executor to pay the beneficiary’s inheritance to the creditor, instead of the beneficiary. It also prevents the beneficiary from procuring a debt based on a future inheritance.
It is important to be aware that a spendthrift provision in a will or a spendthrift trust has limitations. The assets are only protected when they are in the trust or in the estate. Once a distribution is received, creditors can seek payment from the assets owned by the beneficiary.
Another qualifying factor: the spendthrift provision in the will must prevent both the voluntary and involuntary transfer of a beneficiary’s interest. The beneficiary may not transfer their interest to someone else.
The spendthrift trust and clause are mainly intended to protect a beneficiary’s interests from present and future creditors. They are not valid if their intent is to defraud others and may not be created to avoid paying any IRS debts.
Reference: Record Courier (July 10, 2021) “Possible to spendthrift-proof a trust”
Can You Believe Aging Parents Grow Stubborn and They Know It?
Studies show that adult children complain that their parents are stubborn and that the parents themselves admit this.
Considerable’s recent article entitled “Why are your aging parents so stubborn? Researchers think they have the answer” explains that as children become more involved, they may make suggestions for things that older adults might do to maintain their safety and well-being.
However, older adults see things differently, says a study of 189 aging parents with an adult child.
Researchers say a primary reason is differing goals of children and parents. An aging parent might want to exercise his independence, by walking to the store for groceries. However, his adult son may see it as risking a fall.
A study that asked 192 middle-aged adults to keep diaries of their parents’ behavior found that 75% of adult children and 66% of older parents reported that the parents acted stubbornly sometimes. Just 40% of children and 20% of parents said the stubborn behavior happened frequently.
A third reported stubborn behavior at least once, and about 20% reported risky behavior at least once in a seven-day period.
The studies wanted to distinguish the difference between stubbornness as a personality trait and as behavior that can be modified.
The research cautioned that such circumstances could harm the emotional well-being of the adult children and their relationships with their parents.
“As parents age, every day, some adult children encounter behaviors that are difficult to manage,” the second study said.
Children with good relationships with their parents reported less stubbornness and vice versa, as one might expect.
Children were more likely to report parental stubbornness, if the parents were disabled, and children were likely to say that fathers were more stubborn than mothers.
These tensions in families may have a “corrosive effect,” in the way in which adult children and their parents interact with one another over the long term, the researchers said.
Reference: Considerable (July 17, 2020) “Why are your aging parents so stubborn? Researchers think they have the answer”
Suggested Key Terms: Elder Law Attorney, Elder Care, Caregiving, Dementia, Alzheimer’s Disease
Here’s Why You Need an Estate Plan
It’s always the right time to do your estate planning, but it’s most critical when you have beneficiaries who are minors or with special needs, says the Capital Press in the recent article, “Ag Finance: Why you need to do estate planning.”
While it’s likely that most adult children can work things out, even if it’s costly and time-consuming in probate, minor young children must have protections in place. Wills are frequently written, so the estate goes to the child when he reaches age 18. However, few teens can manage big property at that age. A trust can help, by directing that the property will be held for him by a trustee or executor until a set age, like 25 or 30.
Probate is the default process to administer an estate after someone’s death, when a will or other documents are presented in court and an executor is appointed to manage it. It also gives creditors a chance to present claims for money owed to them. Distribution of assets will occur only after all proper notices have been issued, and all outstanding bills have been paid.
Probate can be expensive. However, wise estate planning can help most families avoid this and ensure the transition of wealth and property in a smooth manner. Talk to an experienced estate planning attorney about establishing a trust. Farmers can name themselves as the beneficiaries during their lifetime, and instruct to whom it will pass after their death. A living trust can be amended or revoked at any time, if circumstances change.
The title of the farm is transferred to the trust with the farm’s former owner as trustee. With a trust, it makes it easier to avoid probate because nothing’s in his name, and the property can transition to the beneficiaries without having to go to court. Living trusts also help in the event of incapacity or a disease, like Alzheimer’s, to avoid conservatorship (guardianship of an adult who loses capacity). It can also help to decrease capital gains taxes, since the property transfers before their death.
If you have several children, but only two work with you on the farm, an attorney can help you with how to divide an estate that is land rich and cash poor.
Reference: Capital Press (December 20, 2018) “Ag Finance: Why you need to do estate planning”
Will I Live Longer, if I Babysit the Grandchildren?
There’s a growing body of research that supports the notion that grandparents will live longer if they babysit the grandchildren. Parents with young children can know that their parents and their children are getting benefits from babysitting time together, says Considerable’s June article entitled “Grandparents who babysit a grandchild live longer, study finds.”
Considerable spoke with Dr. David Coall, senior lecturer at Edith Cowan University and a co-author of a 2017 study that found a connection between grandparent caregiving and mortality. Dr. Coall gave some updates in the field and highlighted further connections that still need to be made.
The 2017 study that Dr. Coall co-authored analyzed date from the Berlin Aging Study (BASE), which monitored the health and social conditions of over 500 participants in Germany between 1990 and 2009. The study focused on grandparents who simply provided periodic babysitting, rather than primary caregiving for their grandchildren.
Dr. Coall’s team of researchers found that caregiving grandparents had a 37% lower risk of death than non-caregiving grandparents. The same 37% risk reduction in mortality was found when comparing caregiving grandparents with non-grandparents.
Therefore, the risk of dying over a 20-year period was a third lower for grandparents who provided some level of care for their grandchildren, as opposed to grandparents who provided no care at all.
According to Dr. Coall, “The obvious next question was, ‘Is that purely because healthier grandparents are more likely to babysit and live longer?’”
In August 2017, he used the same BASE data to see if grandparents were healthier due to babysitting, or if they were babysitting, because they were already healthier and able to do so. Dr. Coall found that health only accounted for 22% of the link between helping and longevity. Interestingly, a direct effect of babysitting on longevity still existed in the data.
“So, we continue to look for what could be making this link between helping and living longer.”
Some longitudinal studies have examined if babysitting is linked with a subsequent improvement in grandparental health, with mixed results. The most recent study, a collaboration with researchers in Finland that was published in July, looked at whether an individual who became a grandparent subsequently went on to enjoy improved health.
Dr. Coall said that the research shows “a specific improvement in physical health, but not in emotional or mental health. Maybe this works through increased activity levels looking after grandchildren.”
Reference: Considerable (June 23, 2020) “Grandparents who babysit a grandchild live longer, study finds”
Suggested Key Terms: Elder Law Attorney, Child Care, Caregiving