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.
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 Ł50,000 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.
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
Sect.117 can deal with false statements and knowingly making false allegations of violence could justify a costs order.
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